Edgar Filing: Bank of New York Mellon Corp

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[ X ] Quarterly Report Pursuant To Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2015

[ ] Transition Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Commission File No. 001-35651

THE BANK OF NEW YORK MELLON CORPORATION

(Exact name of registrant as specified in its charter)



Delaware	13-2614959
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

225 Liberty Street

New York, New York 10286

(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code -- (212) 495-1784

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X No ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer [ X ]	Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)	Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ___ No X

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



	Class	Outstanding as of
		Sept. 30, 2015
	Common Stock, $0.01 par value	1,092,952,592

THE BANK OF NEW YORK MELLON CORPORATION

Third Quarter 2015 Form 10-Q

Table of Contents



	Page
Consolidated Financial Highlights (unaudited)	2

Part I - Financial Information
Items 2. and 3. Management’s Discussion and Analysis of Financial Condition and Results of Operations; Quantitative and Qualitative Disclosures About Market Risk:
General	4
Overview	4
Key third quarter 2015 and subsequent events	4
Highlights of third quarter 2015 results	5
Fee and other revenue	7
Net interest revenue	10
Average balances and interest rates	11
Noninterest expense	13
Income taxes	14
Review of businesses	14
Critical accounting estimates	25
Consolidated balance sheet review	25
Liquidity and dividends	37
Capital	42
Trading activities and risk management	48
Asset/liability management	50
Off-balance sheet arrangements	51
Supplemental information - Explanation of GAAP and Non-GAAP financial measures	52
Recent accounting and regulatory developments	57
Website information	61

Item 1. Financial Statements:
Consolidated Income Statement (unaudited)	62
Consolidated Comprehensive Income Statement (unaudited)	64
Consolidated Balance Sheet (unaudited)	65
Consolidated Statement of Cash Flows (unaudited)	66
Consolidated Statement of Changes in Equity (unaudited)	67



	Page
Notes to Consolidated Financial Statements:
Note 1—Basis of presentation	68
Note 2—Accounting changes and new accounting guidance	68
Note 3—Acquisitions and dispositions	70
Note 4—Securities	71
Note 5—Loans and asset quality	75
Note 6—Goodwill and intangible assets	82
Note 7—Other assets	83
Note 8—Net interest revenue	85
Note 9—Employee benefit plans	85
Note 10—Restructuring charges	86
Note 11—Income taxes	87
Note 12—Securitizations and variable interest entities	87
Note 13—Preferred stock	89
Note 14—Other comprehensive income (loss)	90
Note 15—Fair value measurement	91
Note 16—Fair value option	102
Note 17—Derivative instruments	102
Note 18—Commitments and contingent liabilities	109
Note 19—Lines of business	115
Note 20—Supplemental information to the Consolidated Statement of Cash Flows	118

Item 4. Controls and Procedures	119
Forward-looking Statements	120

Part II - Other Information
Item 1. Legal Proceedings	121
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	121
Item 6. Exhibits	121

Signature	122
Index to Exhibits	123

The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Financial Highlights (unaudited)



	Quarter ended									Year-to-date
(dollar amounts in millions, except per common share amounts and unless otherwise noted)	Sept. 30, 2015			June 30, 2015			Sept. 30, 2014			Sept. 30, 2015			Sept. 30, 2014
Results applicable to common shareholders of The Bank of New York Mellon Corporation:
Net income	$	820		$	830		$	1,070		$	2,416		$	2,285
Basic earnings per share	0.74			0.74			0.93			2.15			1.98
Diluted earnings per share	0.74			0.73			0.93			2.13			1.97

Fee and other revenue	$	3,053		$	3,067		$	3,851		$	9,132		$	9,714
(Loss) income from consolidated investment management funds	(22		)	40			39			70			121
Net interest revenue	759			779			721			2,266			2,168
Total revenue	$	3,790		$	3,886		$	4,611		$	11,468		$	12,003

Return on common equity (annualized) (a)	9.1		%	9.4		%	11.6		%	9.1		%	8.4		%
Non-GAAP (a)(b)	9.7		%	10.3		%	8.5		%	9.7		%	8.2		%

Return on tangible common equity (annualized) – Non-GAAP (a)	20.8		%	21.5		%	26.2		%	20.9		%	19.6		%
Non-GAAP adjusted (a)(b)	21.0		%	22.5		%	18.4		%	21.2		%	18.1		%

Return on average assets (annualized)	0.87		%	0.88		%	1.12		%	0.86		%	0.83		%

Fee revenue as a percentage of total revenue excluding net securities gains	80		%	79		%	83		%	80		%	81		%

Percentage of non-U.S. total revenue (c)	37		%	36		%	43		%	37		%	39		%

Pre-tax operating margin (a)	29		%	30		%	36		%	29		%	28		%
Non-GAAP (a)(b)	31		%	33		%	29		%	31		%	28		%

Net interest margin (FTE)	0.98		%	1.00		%	0.94		%	0.98		%	0.99		%

Assets under management at period end (in billions) (d)	$	1,625		$	1,700		$	1,620		$	1,625		$	1,620
Assets under custody and/or administration (“AUC/A”) at period end (in trillions) (e)	$	28.5		$	28.6		$	28.3		$	28.5		$	28.3
Market value of securities on loan at period end (in billions) (f)	$	288		$	283		$	282		$	288		$	282

Average common shares and equivalents outstanding (in thousands):
Basic	1,098,003			1,113,790			1,126,946			1,110,056			1,133,006
Diluted	1,105,645			1,122,135			1,134,871			1,117,975			1,139,718


Capital ratios	Sept. 30, 2015			June 30, 2015			Dec. 31, 2014
Consolidated regulatory capital ratios: (g)
Common equity Tier 1 (“CET1”) ratio	10.5		%	10.9		%	11.2		%
Tier 1 capital ratio	11.9		%	12.5		%	12.2		%
Total (Tier 1 plus Tier 2) capital ratio	12.2		%	12.8		%	12.5		%
Leverage capital ratio	5.9		%	5.8		%	5.6		%

BNY Mellon shareholders’ equity to total assets ratio – GAAP (a)	10.1		%	9.7		%	9.7		%
BNY Mellon common shareholders’ equity to total assets ratio – GAAP (a)	9.4		%	9.0		%	9.3		%
BNY Mellon tangible common shareholders’ equity to tangible assets of operations ratio – Non-GAAP (a)	6.2		%	6.2		%	6.5		%

Selected regulatory capital ratios – fully phased-in – Non-GAAP:
Estimated CET1 ratio: (h)
Standardized Approach	9.9		%	10.0		%	10.6		%
Advanced Approach	9.3		%	9.9		%	9.8		%

Estimated supplementary leverage ratio (“SLR”) (i)	4.8		%	4.6		%	4.4		%

2 BNY Mellon

Consolidated Financial Highlights (unaudited) (continued)



	Quarter ended									Year-to-date
(dollar amounts in millions, except per common share amounts and unless otherwise noted)	Sept. 30, 2015			June 30, 2015			Sept. 30, 2014			Sept. 30, 2015			Sept. 30, 2014
Selected average balances
Interest-earning assets	$	315,672		$	318,596		$	311,603		$	314,152		$	299,064
Assets of operations	$	371,328		$	375,999		$	370,167		$	371,156		$	357,301
Total assets	$	373,453		$	378,279		$	380,409		$	373,400		$	368,297
Interest-bearing deposits	$	169,753		$	170,716		$	164,233		$	166,700		$	160,006
Noninterest-bearing deposits	$	85,046		$	84,890		$	82,334		$	86,493		$	80,531
Preferred stock	$	2,552		$	2,313		$	1,562		$	2,146		$	1,562
Total The Bank of New York Mellon Corporation common shareholders’ equity	$	35,588		$	35,516		$	36,751		$	35,530		$	36,537

Other information at period end
Cash dividends per common share	$	0.17		$	0.17		$	0.17		$	0.51		$	0.49
Common dividend payout ratio	23		%	23		%	18		%	24		%	25		%
Common dividend yield (annualized)	1.7		%	1.6		%	1.7		%	1.7		%	1.7		%
Closing stock price per common share	$	39.15		$	41.97		$	38.73		$	39.15		$	38.73
Market capitalization	$	42,789		$	46,441		$	43,599		$	42,789		$	43,599
Book value per common share – GAAP (a)	$	32.59		$	32.28		$	32.77		$	32.59		$	32.77
Tangible book value per common share – Non-GAAP (a)	$	15.16		$	14.86		$	15.30		$	15.16		$	15.30
Full-time employees	51,300			50,700			50,900			51,300			50,900
Common shares outstanding (in thousands)	1,092,953			1,106,518			1,125,710			1,092,953			1,125,710


(a)	See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 52 for a reconciliation of Non-GAAP measures.

(b)

Non-GAAP excludes the gains on the sales of our equity investment in Wing Hang Bank Limited (“Wing Hang”) and our One Wall Street building, net (loss) income attributable to noncontrolling interests of consolidated investment management funds, amortization of intangible assets, M&I, litigation and restructuring charges (recoveries) and the charge related to investment management funds, net of incentives, if applicable.


(c)	Includes fee revenue, net interest revenue and income of consolidated investment management funds, net of net income attributable to noncontrolling interests.


(d)	Excludes securities lending cash management assets and assets managed in the Investment Services business. In the third quarter of 2015, prior period AUM was restated to reflect the reclassification of Meriten from the Investment Management business to the Other segment.


(e)	Includes the AUC/A of CIBC Mellon Global Securities Services Company (“CIBC Mellon”), a joint venture with the Canadian Imperial Bank of Commerce, of $1.0 trillion at Sept. 30, 2015, $1.1 trillion at June 30, 2015 and $1.2 trillion at Sept. 30, 2014.


(f)	Represents the total amount of securities on loan managed by the Investment Services business. Excludes securities for which BNY Mellon acts as an agent on behalf of CIBC Mellon clients, which totaled $61 billion at Sept. 30, 2015, $68 billion at June 30, 2015 and $65 billion at Sept. 30, 2014.

(g)

The CET1, Tier 1 and Total risk-based consolidated regulatory capital ratios are based on Basel III components of capital, as phased-in, and credit risk asset risk-weightings using the U.S. capital rules’ advanced approaches framework (the “Advanced Approach”). The leverage capital ratios are based on Basel III’s definition of Tier 1 capital, as phased-in, and quarterly average total assets. For additional information on these ratios, see “Capital” beginning on page 42.


(h)	The estimated fully phased-in CET1 ratios (Non-GAAP) are based on our interpretation of U.S. capital rules, which are being gradually phased-in over a multi-year period. For additional information on these Non-GAAP ratios, see “Capital” beginning on page 42.

(i)

The estimated fully phased-in SLR (Non-GAAP) is based on our interpretation of the U.S. capital rules. When the SLR becomes effective, we expect to maintain an SLR of over 5%. The minimum required SLR is 3% and there is a 2% buffer, in addition to the minimum, that is applicable to U.S. global systemically important banks (“G-SIBs”). For additional information on these Non-GAAP ratios, see “Capital” beginning on page 42.

BNY Mellon 3

Part I - Financial Information

Items 2. and 3. Management’s Discussion and Analysis of Financial Condition and Results of Operations; Quantitative and Qualitative Disclosures about Market Risk

General

In this Quarterly Report on Form 10-Q, references to “our,” “we,” “us,” “BNY Mellon,” the “Company” and similar terms refer to The Bank of New York Mellon Corporation and its consolidated subsidiaries. The term “Parent” refers to The Bank of New York Mellon Corporation but not its subsidiaries.

Certain business terms used in this report are defined in the Glossary included in our Annual Report on Form 10-K for the year ended Dec. 31, 2014 (“2014 Annual Report”).

The following should be read in conjunction with the Consolidated Financial Statements included in this report. Investors should also read the section titled “Forward-looking Statements.”

How we reported results

Throughout this Form 10-Q, certain measures, which are noted as “Non-GAAP financial measures,” exclude certain items or otherwise include components that differ from U.S. generally accepted accounting principles (“GAAP”). BNY Mellon believes that these measures are useful to investors because they permit a focus on period-to-period comparisons using measures that relate to our ability to enhance revenues and limit expenses in circumstances where such matters are within our control. We also present the net interest revenue and net interest margin on a fully taxable equivalent (“FTE”) basis. We believe that this presentation allows for comparison of amounts arising from both taxable and tax-exempt sources and is consistent with industry practice. Certain immaterial reclassifications have been made to prior periods to place them on a basis comparable with the current period presentation. See “Supplemental information - Explanation of GAAP and Non-GAAP financial measures” beginning on page 52 for a reconciliation of financial measures presented in accordance with GAAP to adjusted Non-GAAP financial measures.

When in this Form 10-Q we refer to BNY Mellon’s or our bank subsidiary’s “Basel I” capital measures, we mean those capital measures, as calculated under the Board of Governors of the Federal Reserve System’s (the “Federal Reserve”) risk-based capital rules that

are based on the 1988 Basel Accord, which is often referred to as “Basel I.” When we refer to BNY Mellon’s “Basel III” capital measures (e.g., Basel III CET1), we mean those capital measures as calculated under the U.S. capital rules.

Overview

BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE symbol: BK). 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 management and investment services in 35 countries and more than 100 markets. As of Sept. 30, 2015, BNY Mellon had $28.5 trillion in assets under custody and/or administration, and $1.6 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.

Key third quarter 2015 and subsequent events

Corporate Headquarters

On Oct. 1, 2015, BNY Mellon relocated its corporate headquarters to Brookfield Place in lower Manhattan’s Battery Park City. This move is part of the Company’s previously-announced decision to consolidate and streamline operations. The previous corporate headquarters was located at One Wall Street in lower Manhattan, which was sold in the third quarter of 2014.

SunGard matter

In August 2015, the SunGard U.S. InvestOne fund accounting platform environment we use to process net asset values (“NAVs”) became corrupted during an operating system upgrade undertaken by SunGard, impacting certain mutual fund, exchange-traded fund and unregistered collective fund clients. The resulting outage delayed or prevented us from being able to deliver system-generated NAVs and client reports to these clients in a timely manner during the

4 BNY Mellon

week of Aug. 24-28, 2015. During the period when system-generated NAVs were delayed, we were generally able to provide our fund clients with daily NAVs using alternative procedures, as directed by them. System-generated NAVs returned to daily production on Monday, Aug. 31, 2015.‬

Sale of Meriten Investment Management

On July 31, 2015, BNY Mellon completed the sale of Meriten Investment Management GmbH, a German-based investment management boutique with approximately $23 billion in assets under management.

Outsourcing agreement

As announced on June 2, 2015, BNY Mellon was selected to provide portfolio and fund accounting services to support T. Rowe Price’s investment operation, which had assets valued in excess of $770 billion as of March 31, 2015. In addition to supporting T. Rowe Price’s portfolio accounting services through our Eagle/OnCore platform, BNY Mellon is providing a range of fund accounting and administration services.

In August 2015, approximately 220 T. Rowe Price associates – the majority based in the Baltimore area – became BNY Mellon employees.

Highlights of third quarter 2015 results

We reported net income applicable to common shareholders of $820 million, or $0.74 per diluted common share, in the third quarter of 2015. In the third quarter of 2014, net income applicable to common shareholders was $1.1 billion, or $0.93 per diluted common share, or $734 million, or $0.64 per diluted common share (Non-GAAP), adjusted for gains related to the sales of our equity investment in Wing Hang and our One Wall Street building, net of litigation and restructuring charges. In the second quarter of 2015, net income applicable to common shareholders totaled $830 million, or $0.73 per diluted common share, or $868 million or $0.77 per diluted common share (Non-GAAP), adjusted for litigation and restructuring charges. See “Supplemental information - Explanation of GAAP and Non-GAAP financial measures” beginning on page 52 for the reconciliation of Non-GAAP measures.

Highlights of the third quarter of 2015 include:


•	AUC/A totaled $28.5 trillion compared with $28.3 trillion at Sept. 30, 2014. The increase primarily reflects net new business, partially offset by the unfavorable impact of a stronger U.S. dollar and lower equity market values. (See “Investment Services business” beginning on page 21).

•

AUM, excluding securities lending cash management assets and assets managed in the Investment Services business, totaled $1.63 trillion compared with $1.62 trillion at Sept. 30, 2014. The increase resulted from higher market values, the Cutwater acquisition and net new business offset by the unfavorable impact of a stronger U.S. dollar. (See “Investment Management business” beginning on page 18).

•

Investment services fees totaled $1.85 billion, an increase of 2% compared with $1.82 billion in the third quarter of 2014. The increase reflects net new business and organic growth, primarily in Global Collateral Services, Broker-Dealer Services and Asset Servicing, and higher clearing services revenue, partially offset by the unfavorable impact of a stronger U.S. dollar. (See “Investment Services business” beginning on page 21).

•

Investment management and performance fees totaled $829 million compared with $881 million in the third quarter of 2014, a decrease of 6%, or a decrease of 2% on a constant currency basis (Non-GAAP). The decrease was primarily driven by lower performance fees, lower equity market values, net outflows and the sale of Meriten, partially offset by the impact of the acquisition of Cutwater Asset Management (“Cutwater”) in the first quarter of 2015 and strategic initiatives. (See “Investment Management business” beginning on page 18).


•	Foreign exchange and other trading revenue totaled $179 million compared with $153 million in the third quarter of 2014. Foreign exchange revenue totaled $180 million, an increase of 17% compared with $154 million in the third quarter of 2014. The increase was driven by higher volatility and volumes. (See “Fee and other revenue” beginning on page 7).

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•	Financing-related fees totaled $71 million compared with $44 million in the third quarter of 2014. The increase was primarily driven by higher fees related to secured intraday credit provided to dealers in connection with their tri-party repo activity and higher underwriting fees. (See “Fee and other revenue” beginning on page 7).


•	Investment and other income totaled $59 million compared with $890 million in the third quarter of 2014. The decrease primarily reflects gains on the sales of our equity investment in Wing Hang and our One Wall Street building in the third quarter of 2014. (See “Fee and other revenue” beginning on page 7).


•	Net interest revenue totaled $759 million compared with $721 million in the third quarter of 2014. The increase primarily reflects higher securities and loans due to higher deposits and a shift out of cash, and lower interest expense on deposits. (See “Net interest revenue” beginning on page 10).


•	The provision for credit losses was $1 million in the third quarter of 2015 and a credit of $19 million in the third quarter of 2014. (See “Asset quality and allowance for credit losses” beginning on page 34).

•

Noninterest expense totaled $2.68 billion compared with $2.97 billion in the third quarter of 2014. The decrease reflects lower expenses in all categories, except other expense. The lower expenses primarily reflect the favorable impact of a stronger U.S. dollar, lower legal and consulting expenses and the benefit of the business improvement process which focuses on reducing structural costs. The decrease was partially offset by higher consulting expenses associated with regulatory requirements. (See “Noninterest expense” beginning on page 13).


•	The provision for income taxes was $282 million (25.4% effective tax rate). (See “Income taxes” on page 14).


•	The net unrealized pre-tax gain on the investment securities portfolio was $1.0 billion compared with $752 million at June 30, 2015. The increase was primarily driven by a decline in interest rates. (See “Investment securities” beginning on page 29).


•	Our estimated CET1 ratio (Non-GAAP) calculated under the Advanced Approach on a fully phased-in basis was 9.3% at Sept. 30, 2015 and 9.9% at June 30, 2015. Our estimated CET1 ratio (Non-GAAP) calculated under the Standardized Approach on a fully phased-in basis was 9.9% at Sept. 30, 2015 and 10.0% at June 30, 2015. (See “Capital” beginning on page 42).

6 BNY Mellon

Fee and other revenue



Fee and other revenue															YTD15
							3Q15 vs.				Year-to-date				vs.
(dollars in millions, unless otherwise noted)	3Q15		2Q15		3Q14		2Q15		3Q14		2015		2014		YTD14
Investment services fees:
Asset servicing (a)	$	1,057	$	1,060	$	1,025	—	%	3	%	$	3,155	$	3,056	3	%
Clearing services	345		347		337		(1	)	2		1,036		988		5
Issuer services	313		234		315		34		(1	)	779		775		1
Treasury services	137		144		142		(5	)	(4	)	418		419		—
Total investment services fees	1,852		1,785		1,819		4		2		5,388		5,238		3
Investment management and performance fees	829		878		881		(6	)	(6	)	2,574		2,607		(1	)
Foreign exchange and other trading revenue	179		187		153		(4	)	17		595		419		42
Financing-related fees	71		58		44		22		61		169		126		34
Distribution and servicing	41		39		44		5		(7	)	121		130		(7	)
Investment and other income	59		104		890		(43	)	N/M		223		1,134		N/M
Total fee revenue	3,031		3,051		3,831		(1	)	(21	)	9,070		9,654		(6	)
Net securities gains	22		16		20		N/M		N/M		62		60		N/M
Total fee and other revenue	$	3,053	$	3,067	$	3,851	—	%	(21	)%	$	9,132	$	9,714	(6	)%

AUM at period end (in billions) (b)	$	1,625	$	1,700	$	1,620	(4	)%	—	%	$	1,625	$	1,620	—	%
AUC/A at period end (in trillions) (c)	$	28.5	$	28.6	$	28.3	—	%	1	%	$	28.5	$	28.3	1	%


(a)	Asset servicing fees include securities lending revenue of $38 million in the third quarter of 2015, $49 million in the second quarter of 2015, $37 million in the third quarter of 2014, $130 million in the first nine months of 2015 and $121 million in the first nine months of 2014.


(b)	Excludes securities lending cash management assets and assets managed in the Investment Services business. In the third quarter of 2015, prior period AUM was restated to reflect the reclassification of Meriten from the Investment Management business to the Other segment.


(c)	Includes the AUC/A of CIBC Mellon of $1.0 trillion at Sept. 30, 2015, $1.1 trillion at June 30, 2015 and $1.2 trillion at Sept. 30, 2014.

N/M – Not meaningful.

Fee and other revenue decreased 21% compared with the third quarter of 2014 and was flat compared with the second quarter of 2015. The year-over-year decrease reflects the gains on the sales of our equity investment in Wing Hang and our One Wall Street building, as well as lower investment management and performance fees, partially offset by higher asset servicing fees, financing-related fees, foreign exchange and other trading revenue and clearing services fees. Sequentially, lower investment management and performance fees and investment and other income were offset by higher issuer services and financing-related fees.

Investment services fees

Investment services fees were impacted by the following compared with the third quarter of 2014 and the second quarter of 2015:


•	Asset servicing fees increased 3% compared with the third quarter of 2014 and were flat compared with the second quarter of 2015. The year-over-year increase primarily reflects organic growth in the Global Collateral Services, Broker-Dealer

Services and Asset Servicing businesses, and net new business, partially offset by the unfavorable impact of a stronger U.S. dollar. Sequentially, organic growth and net new business were offset by lower securities lending revenue and lower market values.


•	Clearing services fees increased 2% compared with the third quarter of 2014 and decreased 1% (unannualized) compared with the second quarter of 2015. The year-over-year increase was primarily driven by higher mutual fund and asset-based fees.

•

Issuer services fees decreased 1% compared with the third quarter of 2014 and increased 34% (unannualized) compared with the second quarter of 2015. The year-over-year decrease primarily reflects lower fees in Depositary Receipts and the unfavorable impact of a stronger U.S. dollar in Corporate Trust, partially offset by net new business in Corporate Trust. The sequential increase primarily reflects seasonally higher fees in Depositary Receipts.


•	Treasury services fees decreased 4% compared with the third quarter of 2014 and 5% (unannualized) compared with the second quarter

BNY Mellon 7

of 2015. Both decreases primarily reflect lower payment volumes.

See the “Investment Services business” in “Review of businesses” for additional details.

Investment management and performance fees

Investment management and performance fees totaled $829 million in the third quarter of 2015, a decrease of 6% compared with the third quarter of 2014, or a decrease of 2% on a constant currency basis (Non-GAAP). The decrease was primarily driven by lower performance fees, lower equity market values and net outflows, partially offset by the impact of the acquisition of Cutwater in the first quarter of 2015 and strategic initiatives. Compared with the second quarter of 2015, investment management and performance fees decreased 6% (unannualized) primarily reflecting lower equity market values, net outflows and seasonally lower performance fees. Both decreases also reflect the sale of Meriten in July 2015. Performance fees were $7 million in the third quarter of 2015 compared with $22 million in the third quarter of 2014 and $20 million in the second quarter of 2015.

Total AUM for the Investment Management business was $1.63 trillion at Sept. 30, 2015, flat compared with Sept. 30, 2014 and a decrease of 4% compared with June 30, 2015. Year-over-year, higher market values, the Cutwater acquisition and net new business were offset by the unfavorable impact of a stronger U.S. dollar. The sequential decreased primarily reflects lower equity market values. Net long-term outflows were $5 billion in the third quarter of 2015 driven by index, equity and fixed income investments, partially offset by liability-driven and alternative investments. Net short-term outflows were $10 billion in the third quarter of 2015.

See the “Investment Management business” in “Review of businesses” for additional details.

Foreign exchange and other trading revenue



Foreign exchange and other trading revenue									Year-to-date
(in millions)	3Q15			2Q15		3Q14			2015		2014
Foreign exchange	$	180		$	181	$	154		$	578	$	413
Other trading revenue (loss)	(1		)	6		(1		)	17		6
Total foreign exchange and other trading revenue	$	179		$	187	$	153		$	595	$	419

Foreign exchange and other trading revenue totaled $179 million in the third quarter of 2015, $153 million in the third quarter of 2014 and $187 million in the second quarter of 2015. Foreign exchange revenue totaled $180 million in the third quarter of 2015, an increase of 17% compared with the third quarter of 2014 and a decrease of 1% (unannualized) compared with the second quarter of 2015. The year-over-year increase primarily reflects higher volatility and volumes. Foreign exchange revenue is reported in the Investment Services business and the Other segment. Other trading revenue is reported in all three business segments.

Our foreign exchange trading generates revenues which are influenced by the volume of client transactions and the spread realized on these transactions. Revenues are impacted by market pressures which continue to be increasingly competitive. The level of volume and spreads is affected by market volatility, the level of cross-border assets held in custody for clients, the level and nature of underlying cross-border investments and other transactions undertaken by corporate and institutional clients. These revenues also depend on our ability to manage the risk associated with the currency transactions we execute. Generally speaking, custody clients enter into foreign exchange transactions in one of three ways: negotiated trading with BNY Mellon, BNY Mellon’s standing instruction programs, or transactions with third-party foreign exchange providers. For a description of these foreign exchange trading options, see “Fee and other revenue” in our 2014 Annual Report.

A shift by custody clients from the standing instruction programs to other trading options combined with competitive market pressures on the foreign exchange business is negatively impacting our foreign exchange revenue. For the quarter ended Sept. 30, 2015, our total revenue for all types of foreign exchange trading transactions was $180 million, or approximately 5% of our total revenue, and approximately 34% of our foreign exchange revenue resulted from foreign exchange transactions undertaken through our standing instruction programs.

We continue to invest in our foreign exchange trading and execution capabilities, which is leading towards enhanced client service and higher volumes.

8 BNY Mellon

Financing-related fees

Financing-related fees, which are primarily reported in the Other segment, include capital markets fees, loan commitment fees and credit-related fees. Financing-related fees totaled $71 million in the third quarter of 2015, $44 million in the third quarter of 2014 and $58 million in the second quarter of 2015. The year-over-year increase primarily reflects higher fees related to secured intraday credit provided to dealers in connection with their tri-party repo activity. Both increases also reflect higher underwriting fees.

Distribution and servicing fees

Distribution and servicing fee revenue was $41 million in the third quarter of 2015, $44 million in the third quarter of 2014 and $39 million in the second quarter of 2015.

Investment and other income



Investment and other income										Year-to-date
(in millions)	3Q15			2Q15			3Q14			2015			2014
Corporate/bank-owned life insurance	$	32		$	31		$	34		$	96		$	94
Lease residual gains	—			54			5			53			44
Expense reimbursements from joint venture	16			17			13			47			40
Seed capital gains (losses) (a)	7			2			(1		)	25			20
Private equity gains	1			3			2			1			5
Asset-related gains (losses)	(9		)	1			836			(5		)	852
Equity investment revenue (loss)	(6		)	(7		)	(9		)	(17		)	6
Other income	18			3			10			23			73
Total investment and other income	$	59		$	104		$	890		$	223		$	1,134


(a)	Does not include the gain (loss) on seed capital investments in consolidated investment management funds which are reflected in operations of consolidated investment management funds, net of noncontrolling interests.

Investment and other income, which is primarily reported in the Other segment and Investment Management business, includes corporate and bank-owned life insurance contracts, lease residual gains, expense reimbursements from our CIBC Mellon joint venture, seed capital gains and losses, gains on private equity investments, asset-related gains and losses, equity investment revenue and loss and other

income. Expense reimbursements from our CIBC Mellon joint venture relate to expenses incurred by BNY Mellon on behalf of the CIBC Mellon joint venture. Asset-related gains and losses include real estate, loans and other asset dispositions. Other income primarily includes foreign currency remeasurement gain (loss), other investments and various miscellaneous revenues. Investment and other income was $59 million in the third quarter of 2015 compared with $890 million in the third quarter of 2014 and $104 million in the second quarter of 2015. The year-over-year decrease primarily reflects the gains on the sales of our equity investment in Wing Hang and our One Wall Street building, both recorded in the third quarter of 2014. The sequential decrease primarily reflects lower leasing gains.

Year-to-date 2015 compared with year-to-date 2014

Fee and other revenue for the first nine months of 2015 totaled $9.1 billion compared with $9.7 billion in the first nine months of 2014. The decrease reflects the impact of the third quarter 2014 gains on the sales of our equity investment in Wing Hang and our One Wall Street building as well as lower investment management and performance fees, partially offset by higher foreign exchange and other trading revenue, asset servicing fees, clearing services fees, and financing-related fees.

The decrease in investment management and performance fees primarily reflects the unfavorable impact of a stronger U.S. dollar and lower performance fees, partially offset by higher equity market values. The increase in foreign exchange and other trading revenue primarily reflects higher volatility and volumes. The increase in asset servicing fees reflects organic growth in the Global Collateral Services, Broker-Dealer Services and Asset Servicing businesses, and net new business, partially offset by the unfavorable impact of a stronger U.S. dollar. The increase in clearing services fees is primarily attributed to higher mutual fund and asset-based fees, as well as higher clearance and custody revenue. The increase in financing related fees primarily reflects higher fees related to secured intraday credit provided to dealers in connection with their tri-party repo activity.

BNY Mellon 9

Net interest revenue



Net interest revenue																				YTD15
										3Q15 vs.				Year-to-date						vs.
(dollars in millions)	3Q15			2Q15			3Q14			2Q15		3Q14		2015			2014			YTD14
Net interest revenue (non-FTE)	$	759		$	779		$	721		(3	)%	5	%	$	2,266		$	2,168		5	%
Tax equivalent adjustment	14			15			15			(7	)	(7	)	44			48			(8	)
Net interest revenue (FTE) – Non-GAAP	$	773		$	794		$	736		(3	)%	5	%	$	2,310		$	2,216		4	%
Average interest-earning assets	$	315,672		$	318,596		$	311,603		(1	)%	1	%	$	314,152		$	299,064		5	%
Net interest margin (FTE)	0.98		%	1.00		%	0.94		%	(2	) bps	4	bps	0.98		%	0.99		%	(1	) bps

FTE – fully taxable equivalent.

bps – basis points.

Net interest revenue totaled $759 million in the third quarter of 2015, an increase of $38 million compared with the third quarter of 2014 and a decrease of $20 million compared with the second quarter of 2015. The year-over-year increase primarily reflects higher securities and loans due to higher deposits and a shift out of cash, and lower interest expense on deposits. The sequential decrease primarily reflects lower average securities and the impact of interest rate hedging activities.

Average non-U.S. dollar deposits comprised approximately 20% of our average total deposits. Approximately half of the average non-U.S dollar deposits were Euro-denominated.

The net interest margin (FTE) was 0.98% in the third quarter of 2015 compared with 0.94% in the third quarter of 2014 and 1.00% in the second quarter of 2015. The year-over-year increase and the sequential decrease primarily reflect the factors noted above.

Year-to-date 2015 compared with year-to-date 2014

Net interest revenue totaled $2.3 billion in the first nine months of 2015, an increase of 5% compared with the first nine months of 2014. The increase in net interest revenue primarily reflects higher securities and loans due to higher deposits, the shift out of cash and lower interest expense incurred on deposits, partially offset by lower yields on interest-earning assets. The net interest margin (FTE) was 0.98% in the first nine months of 2015, compared with 0.99% in the first nine months of 2014. The decrease in the net interest margin (FTE) primarily reflects lower yields on interest-earning assets, partially offset by lower deposit rates.

10 BNY Mellon



Average balances and interest rates	Quarter ended
	Sept. 30, 2015					June 30, 2015					Sept. 30, 2014
(dollar amounts in millions, presented on an FTE basis)	Average balance			Average rates		Average balance			Average rates		Average balance			Average rates
Assets
Interest-earning assets:
Interest-bearing deposits with banks (primarily foreign banks)	$	20,549		0.45	%	$	20,235		0.56	%	$	34,882		0.66	%
Interest-bearing deposits held at the Federal Reserve and other central banks	84,175			0.20		81,846			0.21		88,713			0.23
Federal funds sold and securities purchased under resale agreements	25,366			0.61		23,545			0.61		15,683			0.61
Margin loans	19,839			1.05		20,467			1.01		18,108			1.04
Non-margin loans:
Domestic offices	27,411			2.15		26,716			2.06		23,826			2.20
Foreign offices	14,407			1.13		13,893			1.19		12,901			1.30
Total non-margin loans	41,818			1.80		40,609			1.77		36,727			1.88
Securities:
U.S. Government obligations	23,935			1.52		28,331			1.42		23,067			1.38
U.S. Government agency obligations	55,624			1.76		56,332			1.77		46,186			1.67
State and political subdivisions – tax-exempt	4,465			2.81		5,021			2.67		5,830			2.54
Other securities	37,164			1.28		38,957			1.24		36,972			1.37
Trading securities	2,737			2.74		3,253			2.63		5,435			2.36
Total securities	123,925			1.63		131,894			1.59		117,490			1.59
Total interest-earning assets	$	315,672		1.08	%	$	318,596		1.08	%	$	311,603		1.05	%
Allowance for loan losses	(184		)			(190		)			(187		)
Cash and due from banks	6,140					6,785					6,225
Other assets	49,700					50,808					52,526
Assets of consolidated investment management funds	2,125					2,280					10,242
Total assets	$	373,453				$	378,279				$	380,409
Liabilities
Interest-bearing liabilities:
Interest-bearing deposits:
Money market rate accounts	$	7,518		0.08	%	$	7,213		0.09	%	$	5,320		0.11	%
Savings	1,279			0.27		1,326			0.27		1,258			0.28
Demand deposits	3,105			0.25		3,109			0.20		2,566			0.21
Time deposits	43,529			0.04		46,807			0.03		41,248			0.04
Foreign offices	114,322			—		112,261			—		113,841			0.05
Total interest-bearing deposits	169,753			0.02		170,716			0.02		164,233			0.06
Federal funds purchased and securities sold under repurchase agreements	14,796			(0.04	)	16,732			(0.02	)	20,620			(0.07	)
Trading liabilities	475			1.42		632			1.84		2,806			0.84
Other borrowed funds	628			1.18		903			1.26		933			0.47
Commercial paper	2,195			0.11		2,892			0.10		3,654			0.07
Payables to customers and broker-dealers	11,504			0.06		11,234			0.07		9,705			0.10
Long-term debt	21,070			1.21		20,625			0.99		20,429			1.12
Total interest-bearing liabilities	$	220,421		0.14	%	$	223,734		0.12	%	$	222,380		0.16	%
Total noninterest-bearing deposits	85,046					84,890					82,334
Other liabilities	27,880					29,840					27,369
Liabilities and obligations of consolidated investment management funds	841					857					8,879
Total liabilities	334,188					339,321					340,962
Temporary equity
Redeemable noncontrolling interests	252					235					244
Permanent equity
Total BNY Mellon shareholders’ equity	38,140					37,829					38,313
Noncontrolling interests	873					894					890
Total permanent equity	39,013					38,723					39,203
Total liabilities, temporary equity and permanent equity	$	373,453				$	378,279				$	380,409
Net interest margin (FTE)				0.98	%				1.00	%				0.94	%


Note:	Interest and average rates were calculated on a taxable equivalent basis, at tax rates approximating 35%, using dollar amounts in thousands and actual number of days in the year.

BNY Mellon 11



Average balances and interest rates	Year-to-date
	Sept. 30, 2015					Sept. 30, 2014
(dollar amounts in millions, presented on an FTE basis)	Average balance			Average rates		Average balance			Average rates
Assets
Interest-earning assets:
Interest-bearing deposits with banks (primarily foreign banks)	$	20,946		0.52	%	$	39,283		0.71	%
Interest-bearing deposits held at the Federal Reserve and other central banks	82,405			0.21		82,939			0.25
Federal funds sold and securities purchased under resale agreements	23,127			0.61		13,413			0.60
Margin loans	20,118			1.02		17,008			1.05
Non-margin loans:
Domestic offices	26,469			2.11		22,804			2.27
Foreign offices	13,649			1.18		13,510			1.30
Total non-margin loans	40,118			1.80		36,314			1.91
Securities:
U.S. Government obligations	26,560			1.44		19,269			1.52
U.S. Government agency obligations	54,911			1.74		44,034			1.73
State and political subdivisions – tax-exempt	4,897			2.70		6,328			2.54
Other securities	38,059			1.28		35,081			1.52
Trading securities	3,011			2.61		5,395			2.38
Total securities	127,438			1.60		110,107			1.71
Total interest-earning assets	$	314,152		1.08	%	$	299,064		1.11	%
Allowance for loan losses	(188		)			(198		)
Cash and due from banks	6,376					5,726
Other assets	50,816					52,709
Assets of consolidated investment management funds	2,244					10,996
Total assets	$	373,400				$	368,297
Liabilities
Interest-bearing liabilities:
Interest-bearing deposits:
Money market rate accounts	$	7,186		0.09	%	$	5,384		0.12	%
Savings	1,344			0.28		1,160			0.27
Demand deposits	3,138			0.22		2,878			0.13
Time deposits	44,533			0.03		41,871			0.04
Foreign offices	110,499			0.01		108,713			0.06
Total interest-bearing deposits	166,700			0.03		160,006			0.06
Federal funds purchased and securities sold under repurchase agreements	15,139			(0.04	)	18,073			(0.08	)
Trading liabilities	633			1.41		2,595			1.08
Other borrowed funds	841			1.12		1,080			0.49
Commercial paper	2,071			0.10		1,922			0.07
Payables to customers and broker-dealers	11,225			0.06		9,171			0.09
Long-term debt	20,635			1.14		20,404			1.12
Total interest-bearing liabilities	$	217,244		0.14	%	$	213,251		0.16	%
Total noninterest-bearing deposits	86,493					80,531
Other liabilities	30,004					25,620
Liabilities and obligations of consolidated investment management funds	900					9,724
Total liabilities	334,641					329,126
Temporary equity
Redeemable noncontrolling interests	240					238
Permanent equity
Total BNY Mellon shareholders’ equity	37,676					38,099
Noncontrolling interests	843					834
Total permanent equity	38,519					38,933
Total liabilities, temporary equity and permanent equity	$	373,400				$	368,297
Net interest margin (FTE)				0.98	%				0.99	%


Note:	Interest and average rates were calculated on a taxable equivalent basis, at tax rates approximating 35%, using dollar amounts in thousands and actual number of days in the year.

12 BNY Mellon

Noninterest expense



Noninterest expense																				YTD15
										3Q15 vs.				Year-to-date						vs.
(dollars in millions)	3Q15			2Q15			3Q14			2Q15		3Q14		2015			2014			YTD14
Staff:
Compensation	$	905		$	877		$	909		3	%	—	%	$	2,653		$	2,737		(3	)%
Incentives	326			349			340			(7	)	(4	)	1,100			1,012			9
Employee benefits	206			208			228			(1	)	(10	)	603			678			(11	)
Total staff	1,437			1,434			1,477			—		(3	)	4,356			4,427			(2	)
Professional, legal and other purchased services	301			299			323			1		(7	)	902			949			(5	)
Software	154			158			154			(3	)	—		470			460			2
Net occupancy	152			149			154			2		(1	)	452			460			(2	)
Distribution and servicing	95			96			107			(1	)	(11	)	289			326			(11	)
Sub-custodian	65			75			67			(13	)	(3	)	210			216			(3	)
Furniture and equipment	72			70			80			3		(10	)	212			247			(14	)
Business development	59			72			61			(18	)	(3	)	192			193			(1	)
Other	268			250			250			7		7		760			820			(7	)
Amortization of intangible assets	66			65			75			2		(12	)	197			225			(12	)
M&I, litigation and restructuring charges	11			59			220			N/M		N/M		67			330			N/M
Total noninterest expense – GAAP	$	2,680		$	2,727		$	2,968		(2	)%	(10	)%	$	8,107		$	8,653		(6	)%

Total staff expense as a percentage of total revenue	38		%	37		%	32		%					38		%	37		%

Full-time employees at period end	51,300			50,700			50,900			1	%	1	%	51,300			50,900			1	%

Memo:
Total noninterest expense excluding amortization of intangible assets, M&I, litigation and restructuring charges and the charge related to investment management funds, net of incentives – Non-GAAP	$	2,603		$	2,603		$	2,673		—	%	(3	)%	$	7,843		$	7,994		(2	)%

N/M – Not meaningful.

Total noninterest expense was $2.7 billion in the third quarter of 2015, a decrease of 10% compared with the third quarter of 2014 and a decrease of 2% (unannualized) compared with the second quarter of 2015. Excluding amortization of intangible assets and M&I, litigation and restructuring charges (Non-GAAP), noninterest expense decreased 3% compared with the third quarter of 2014 and was flat compared with the second quarter of 2015. The year-over-year decrease primarily reflects lower expenses in all categories, except other expenses. The lower expenses primarily reflect the favorable impact of a stronger U.S. dollar, lower legal and consulting expenses and the benefit of the business improvement process which focuses on reducing structural costs. The decrease was partially offset by higher consulting expenses associated with regulatory requirements. Sequentially, the annual merit increase and higher severance and other expenses were offset by lower incentive, business development and sub-custodian expenses. Other expense in the third quarter of 2015 includes a charge to cover out-of-pocket and other incidental expenses incurred by clients impacted by the SunGard systems outage.

We continue to invest in our risk management, regulatory compliance and other control functions in light of increasing regulatory requirements. As a result, we expect an increase in our expense run rate relating to these functions.

Staff expense

Given our mix of fee-based businesses, which are staffed with high-quality professionals, staff expense comprised 55% of total noninterest expense in the third quarter of 2015, third quarter of 2014 and second quarter of 2015, excluding amortization of intangible assets and M&I, litigation and restructuring charges (Non-GAAP).

Staff expense was $1.4 billion in the third quarter of 2015, a decrease of 3% compared with the third quarter of 2014 and flat compared with the second quarter of 2015. The decrease compared with the third quarter of 2014 primarily reflects the favorable impact of a stronger U.S. dollar, the impact of curtailing the U.S. pension plan and lower incentive expense, partially offset by the annual employee

BNY Mellon 13

merit increase and higher severance expense. Sequentially, the annual employee merit increase and higher severance were offset by lower incentives.

Non-staff expense

Non-staff expense, excluding amortization of intangible assets and M&I, litigation and restructuring charges (Non-GAAP), totaled $1.2 billion in the third quarter of 2015, a decrease of 3% compared with the third quarter of 2014 and flat compared with the second quarter of 2015. The decrease compared with the third quarter of 2014 reflects lower expenses in nearly all categories, except other expense. The lower expenses primarily reflect the favorable impact of a stronger U.S. dollar, lower legal and consulting expenses and the benefit of the business improvement process which focuses on reducing structural costs. The decrease was partially offset by higher consulting expenses associated with regulatory requirements. Sequentially, higher other expense was offset by lower business development and sub-custodian expenses.

For additional information on restructuring charges, see Note 10 of the Notes to Consolidated Financial Statements.

Year-to-date 2015 compared with year-to-date 2014

Noninterest expense totaled $8.1 billion in the first nine months of 2015, a decrease of 6%, compared with $8.7 billion in the first nine months of 2014. The decrease primarily reflects lower expenses in nearly all categories, except incentive and software expenses. The lower expenses primarily reflect the favorable impact of a stronger U.S. dollar, the benefit of the business improvement process which focuses on reducing structural costs, lower litigation and restructuring charges, the charge related to investment management funds, net of incentives, which was recorded in 2014 and the impact of curtailing the U.S. pension plan, partially offset by the impact of the new EU Single Resolution Fund and higher consulting expenses associated with regulatory requirements. The increase in incentives reflects better performance.

Income taxes

BNY Mellon recorded an income tax provision of $282 million (25.4% effective tax rate) in the third quarter of 2015. The income tax provision was $556 million (33.5% effective tax rate) in the third quarter of 2014. The gains related to the sale of our equity investment in Wing Hang and sale of our One Wall Street building and litigation expense recorded in the third quarter of 2014 primarily increased the effective tax rate by 7.1% for that quarter. The income tax provision was $276 million (23.7% effective tax rate) in the second quarter of 2015. The effective tax rate in the second quarter of 2015 was reduced by 1.4% due to the income statement presentation of consolidated investment management funds and litigation expense.

We expect the effective tax rate to be approximately 25% in the fourth quarter of 2015.

Review of businesses

We have an internal information system that produces performance data along product and service lines for our two principal businesses and the Other segment.

Business accounting principles

Our business data has been determined on an internal management basis of accounting, rather than the generally accepted accounting principles used for consolidated financial reporting. These measurement principles are designed so that reported results of the businesses will track their economic performance.

For information on the accounting principles of our businesses, the primary types of revenue by business and how our businesses are presented and analyzed, see Note 19 of the Notes to Consolidated Financial Statements.

Business results are subject to reclassification whenever organizational changes are made or when improvements are made in the measurement principles. On July 31, 2015, BNY Mellon completed the sale of Meriten Investment Management GmbH (“Meriten”), a German-based investment management boutique. In the third quarter of 2015, we reclassified the results of Meriten from the Investment Management business to the Other segment. The reclassifications did not impact

14 BNY Mellon

the consolidated results. All prior periods have been restated.

The results of our businesses may be influenced by client activities that vary by quarter. In the second quarter, we typically experience an increase in securities lending fees due to an increase in demand to borrow securities outside of the United States. In the third quarter, Depositary Receipts and related foreign exchange revenue is typically higher due to an increased level of client dividend payments paid in the quarter. Also in the third quarter, volume-related fees may decline due to reduced client activity. In the fourth quarter, we typically incur higher business development and marketing expenses. In our Investment Management business, performance fees are typically higher in the fourth quarter, as the fourth quarter represents the end of the measurement period for many of the performance fee-eligible relationships.

The results of our businesses may also be impacted by the translation of financial results denominated in foreign currencies to the U.S. dollar. We are primarily impacted by activities denominated in the British Pound, Euro and the Indian Rupee. On a consolidated basis and in our Investment Services business, we typically have more foreign currency denominated expenses than revenues. However, our Investment Management business typically has more foreign currency denominated revenues than expenses. As a result, currency fluctuations impact the Investment Management business more than the Investment Services business. However, currency fluctuations, in isolation, are not expected to significantly impact net income on a consolidated basis.

The following table presents key market metrics at period end and on an average basis.



Key market metrics																3Q15 vs.				Year-to-date						YTD15 vs. YTD14
	3Q15			2Q15			1Q15			4Q14			3Q14			2Q15		3Q14		2015			2014
S&P 500 Index (a)	1920			2063			2068			2059			1972			(7) %		(3) %		1920			1972			(3) %
S&P 500 Index – daily average	2027			2102			2064			2009			1976			(4	)	3		2064			1905			8
FTSE 100 Index (a)	6062			6521			6773			6566			6623			(7	)	(8	)	6062			6623			(8	)
FTSE 100 Index – daily average	6399			6920			6793			6526			6756			(8	)	(5	)	6698			6733			(1	)
MSCI World Index (a)	1582			1736			1741			1710			1698			(9	)	(7	)	1582			1698			(7	)
MSCI World Index – daily average	1691			1780			1726			1695			1733			(5	)	(2	)	1732			1693			2
Barclays Capital Global Aggregate Bond^SM Index (a)(b)	346			342			348			357			361			1		(4	)	346			361			(4	)
NYSE and NASDAQ share volume (in billions)	206			185			187			198			173			11		19		578			556			4
JPMorgan G7 Volatility Index – daily average (c)	9.93			10.06			10.40			8.54			6.21			(1	)	60		10.13			6.74			50
Average Fed Funds effective rate	0.13		%	0.13		%	0.11		%	0.10		%	0.09		%	—		4 bps		0.12		%	0.08		%	4 bps
Foreign exchange rates vs. U.S. dollar:
British pound – average rate	$	1.55		$	1.53		$	1.51		$	1.58		$	1.67		1 %		(7) %		$	1.53		$	1.67		(8) %
Euro – average rate	1.11			1.11			1.13			1.25			1.33			—		(17	)	1.11			1.36			(18	)


(a)	Period end.


(b)	Unhedged in U.S. dollar terms.


(c)	The JPMorgan G7 Volatility Index is based on the implied volatility in 3-month currency options.

bps – basis points.

Fee revenue in Investment Management, and to a lesser extent in Investment Services, is impacted by the value of market indices. At Sept. 30, 2015, using the Standard & Poor’s (“S&P”) 500 Index as a proxy for the global equity markets, we estimate that a 100-point change in the value of the S&P 500 Index spread evenly throughout the year, would impact fee revenue by less than 1% and diluted earnings per common share by $0.02 to $0.04. If, however, global

equity markets do not perform in line with the S&P 500 Index, the impact to fee revenue and earnings per share could be different.

Fee waivers are highly sensitive to changes in the Fed Funds effective rate. Assuming no change in client behavior, we expect to recover approximately 70% of the pre-tax income related to fee waivers with a 50 basis point increase in the Fed Funds effective rate.

BNY Mellon 15

The following consolidating schedules show the contribution of our businesses to our overall profitability.



For the quarter ended Sept. 30, 2015 (dollar amounts in millions)	Investment Management			Investment Services		Other	Consolidated
Fee and other revenue	$	846	(a)	$	2,087	$