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 June 30, 2018
or
[ ] 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) | |
240 Greenwich 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 o
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 o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x | Smaller reporting company o |
Accelerated filer o | Emerging growth company o |
Non-accelerated filer o (Do not check if a smaller reporting 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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o 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 | |||
June 30, 2018 | ||||
Common Stock, $0.01 par value | 999,944,587 | |||
THE BANK OF NEW YORK MELLON CORPORATION
Second Quarter 2018 Form 10-Q
Table of Contents
Page | |
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: | |
Key second quarter 2018 and subsequent events | |
Highlights of second quarter 2018 results | |
Business continuity and operational resiliency | |
Item 1. Financial Statements: | |
Page | |
Notes to Consolidated Financial Statements: | |
Note 3—Acquisitions and dispositions | |
Part II - Other Information | |
Index to Exhibits | |
Signature | |
The Bank of New York Mellon Corporation (and its subsidiaries)
Consolidated Financial Highlights (unaudited)
Quarter ended | Year-to-date | |||||||||||||||
(dollars in millions, except per share amounts and unless otherwise noted) | June 30, 2018 | March 31, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | |||||||||||
Results applicable to common shareholders of The Bank of New York Mellon Corporation: | ||||||||||||||||
Net income | $ | 1,055 | $ | 1,135 | $ | 926 | $ | 2,190 | $ | 1,806 | ||||||
Basic earnings per share | $ | 1.04 | $ | 1.11 | $ | 0.88 | $ | 2.15 | $ | 1.71 | ||||||
Diluted earnings per share | $ | 1.03 | $ | 1.10 | $ | 0.88 | $ | 2.14 | $ | 1.70 | ||||||
Fee and other revenue | $ | 3,210 | $ | 3,270 | $ | 3,120 | $ | 6,480 | $ | 6,138 | ||||||
Income (loss) from consolidated investment management funds | 12 | (11 | ) | 10 | 1 | 43 | ||||||||||
Net interest revenue | 916 | 919 | 826 | 1,835 | 1,618 | |||||||||||
Total revenue | $ | 4,138 | $ | 4,178 | $ | 3,956 | $ | 8,316 | $ | 7,799 | ||||||
Return on common equity (annualized) | 11.2 | % | 12.2 | % | 10.4 | % | 11.7 | % | 10.3 | % | ||||||
Return on tangible common equity (annualized) – Non-GAAP (a) | 23.5 | % | 25.9 | % | 21.9 | % | 24.6 | % | 22.1 | % | ||||||
Return on average assets (annualized) | 1.22 | % | 1.29 | % | 1.09 | % | 1.25 | % | 1.07 | % | ||||||
Fee revenue as a percentage of total revenue | 78 | % | 79 | % | 79 | % | 78 | % | 79 | % | ||||||
Percentage of non-U.S. total revenue | 37 | % | 37 | % | 35 | % | 37 | % | 34 | % | ||||||
Pre-tax operating margin | 34 | % | 35 | % | 33 | % | 34 | % | 32 | % | ||||||
Net interest margin | 1.26 | % | 1.22 | % | 1.14 | % | 1.24 | % | 1.14 | % | ||||||
Net interest margin on a fully taxable equivalent (“FTE”) basis – Non-GAAP (b) | 1.26 | % | 1.23 | % | 1.16 | % | 1.25 | % | 1.15 | % | ||||||
Assets under custody and/or administration (“AUC/A”) at period end (in trillions) (c) | $ | 33.6 | $ | 33.5 | $ | 31.1 | $ | 33.6 | $ | 31.1 | ||||||
Assets under management (“AUM”) at period end (in billions) (d) | $ | 1,805 | $ | 1,868 | $ | 1,771 | $ | 1,805 | $ | 1,771 | ||||||
Market value of securities on loan at period end (in billions) (e) | $ | 432 | $ | 436 | $ | 336 | $ | 432 | $ | 336 | ||||||
Average common shares and equivalents outstanding (in thousands): | ||||||||||||||||
Basic | 1,010,179 | 1,016,797 | 1,035,829 | 1,013,507 | 1,038,479 | |||||||||||
Diluted | 1,014,357 | 1,021,731 | 1,041,879 | 1,018,020 | 1,044,809 | |||||||||||
Selected average balances: | ||||||||||||||||
Interest-earning assets | $ | 292,086 | $ | 302,069 | $ | 289,496 | $ | 297,050 | $ | 286,475 | ||||||
Assets of operations | $ | 345,840 | $ | 357,483 | $ | 341,607 | $ | 351,630 | $ | 338,362 | ||||||
Total assets | $ | 346,328 | $ | 358,175 | $ | 342,515 | $ | 352,219 | $ | 339,375 | ||||||
Interest-bearing deposits | $ | 152,799 | $ | 155,704 | $ | 142,336 | $ | 154,244 | $ | 141,084 | ||||||
Long-term debt | $ | 28,349 | $ | 28,407 | $ | 27,398 | $ | 28,378 | $ | 26,644 | ||||||
Noninterest-bearing deposits | $ | 64,768 | $ | 71,005 | $ | 73,886 | $ | 67,869 | $ | 73,721 | ||||||
Preferred stock | $ | 3,542 | $ | 3,542 | $ | 3,542 | $ | 3,542 | $ | 3,542 | ||||||
Total The Bank of New York Mellon Corporation common shareholders’ equity | $ | 37,750 | $ | 37,593 | $ | 35,862 | $ | 37,672 | $ | 35,416 | ||||||
Other information at period end: | ||||||||||||||||
Cash dividends per common share | $ | 0.24 | $ | 0.24 | $ | 0.19 | $ | 0.48 | $ | 0.38 | ||||||
Common dividend payout ratio | 23 | % | 22 | % | 22 | % | 22 | % | 22 | % | ||||||
Common dividend yield (annualized) | 1.8 | % | 1.9 | % | 1.5 | % | 1.8 | % | 1.5 | % | ||||||
Closing stock price per common share | $ | 53.93 | $ | 51.53 | $ | 51.02 | $ | 53.93 | $ | 51.02 | ||||||
Market capitalization | $ | 53,927 | $ | 52,080 | $ | 52,712 | $ | 53,927 | $ | 52,712 | ||||||
Book value per common share | $ | 37.97 | $ | 37.78 | $ | 35.26 | $ | 37.97 | $ | 35.26 | ||||||
Tangible book value per common share – Non-GAAP (a) | $ | 19.00 | $ | 18.78 | $ | 17.53 | $ | 19.00 | $ | 17.53 | ||||||
Full-time employees | 52,000 | 52,100 | 52,800 | 52,000 | 52,800 | |||||||||||
Common shares outstanding (in thousands) | 999,945 | 1,010,676 | 1,033,156 | 999,945 | 1,033,156 | |||||||||||
2 BNY Mellon
Consolidated Financial Highlights (unaudited) (continued)
Regulatory capital and other ratios | June 30, 2018 | March 31, 2018 | Dec. 31, 2017 | |||
Average liquidity coverage ratio (“LCR”) | 118 | % | 116 | % | 118 | % |
Regulatory capital ratios: (f) | ||||||
Advanced: | ||||||
Common equity Tier 1 (“CET1”) ratio | 11.0 | % | 10.7 | % | 10.3 | % |
Tier 1 capital ratio | 13.1 | 12.7 | 12.3 | |||
Total (Tier 1 plus Tier 2) capital ratio | 13.8 | 13.4 | 13.0 | |||
Standardized: | ||||||
CET1 ratio | 11.9 | % | 11.7 | % | 11.5 | % |
Tier 1 capital ratio | 14.1 | 14.0 | 13.7 | |||
Total (Tier 1 plus Tier 2) capital ratio | 15.1 | 14.9 | 14.7 | |||
Tier 1 leverage ratio (f) | 6.7 | % | 6.5 | % | 6.4 | % |
Supplementary leverage ratio (“SLR”) (f) | 6.1 | 5.9 | 5.9 | |||
BNY Mellon shareholders’ equity to total assets ratio | 11.8 | % | 11.2 | % | 11.1 | % |
BNY Mellon common shareholders’ equity to total assets ratio | 10.8 | 10.2 | 10.1 | |||
(a) | Return on tangible common equity and tangible book value per common share, Non-GAAP measures, exclude goodwill and intangible assets, net of deferred tax liabilities. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 40 for the reconciliation of Non-GAAP measures. |
(b) | See “Average balances and interest rates” on page 9 for a reconciliation of this Non-GAAP measure. |
(c) | Includes the AUC/A of CIBC Mellon Global Securities Services Company (“CIBC Mellon”), a joint venture with the Canadian Imperial Bank of Commerce, of $1.4 trillion at June 30, 2018, $1.3 trillion at March 31, 2018 and $1.2 trillion at June 30, 2017. |
(d) | Excludes securities lending cash management assets and assets managed in the Investment Services business. |
(e) | 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 an agent on behalf of CIBC Mellon clients, which totaled $70 billion at June 30, 2018, $73 billion at March 31, 2018 and $66 billion at June 30, 2017. |
(f) | For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced Approaches. The risk-based regulatory capital ratios, Tier 1 leverage ratio and SLR are presented on a fully phased-in basis for Dec. 31, 2017. Beginning Jan. 1, 2018, regulatory ratios are fully phased-in. For additional information on our capital ratios, see “Capital” beginning on page 32. |
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, 2017 (“2017 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.”
Overview
Established in 1784 by Alexander Hamilton, we were the first company listed on the New York Stock Exchange (NYSE: BK). With a more than 230-year history, BNY Mellon is a global company that manages and services assets for financial institutions, corporations and individual investors in 35 countries.
BNY Mellon has two business segments, Investment Services and Investment Management, which offer a comprehensive set of capabilities and deep expertise across the investment lifecycle, enabling the company to provide solutions to buy-side and sell-side market participants, as well as leading institutional and wealth management clients globally.
The diagram below presents our two business segments and lines of business, with the remaining operations in the Other segment.
Key second quarter 2018 and subsequent events
Capital plan, share repurchase program and increase in cash dividend on common stock
In June 2018, BNY Mellon received confirmation that the Federal Reserve did not object to our 2018 capital plan submitted in connection with its Comprehensive Capital Analysis and Review (“CCAR”). Our board of directors subsequently approved the repurchase of up to $2.4 billion of common stock starting in the third quarter of 2018 and continuing through the second quarter of 2019.
Additionally, in July 2018, our board of directors approved a 17% increase in the quarterly cash dividend on common stock, which was also included in our 2018 capital plan, from $0.24 to $0.28 per share. This increased quarterly cash dividend will be paid on Aug. 10, 2018.
Corporate headquarters
In July 2018, BNY Mellon relocated its corporate headquarters to 240 Greenwich Street in lower Manhattan.
4 BNY Mellon
Highlights of second quarter 2018 results
We reported net income applicable to common shareholders of $1.06 billion, or $1.03 per diluted common share, in the second quarter of 2018. Net income applicable to common shareholders was $926 million, or $0.88 per diluted common share, in the second quarter of 2017. The highlights below are based on the second quarter of 2018 compared with the second quarter of 2017, unless otherwise noted.
• | Total revenue of $4.1 billion increased 5% primarily reflecting: |
• | Fee revenue increased 3% primarily reflecting higher equity market values, the favorable impact of a weaker U.S. dollar, higher foreign exchange revenue and growth in collateral management, partially offset by lease-related gains recorded in the second quarter of 2017. (See “Fee and other revenue” beginning on page 6.) |
• | Net interest revenue increased 11% primarily driven by higher rates. (See “Net interest revenue” on page 8.) |
• | Noninterest expense of $2.7 billion increased 3% primarily reflecting investments in technology, expenses associated with the continued consolidation of our real estate and the unfavorable impact of a weaker U.S. dollar, partially offset by decreases in other expenses. (See “Noninterest expense” beginning on page 11.) |
• | Effective tax rate of 20.5%. (See “Income taxes” on page 11.) |
Capital and liquidity
• | CET1 ratio under the Advanced Approach was 11.0% at June 30, 2018 and 10.7% at March 31, 2018. The increase primarily reflects capital generated through earnings and lower risk-weighted assets, partially offset by capital deployed through common stock repurchases and payments of dividends, as well as foreign currency translation adjustments. (See “Capital” beginning on page 32.) |
• | Repurchased 12 million common shares for $651 million and paid $244 million in dividends to common shareholders. |
Highlights of our principal businesses
Investment Services
• | Total revenue increased 8%. |
• | Income before taxes increased 20%. |
• | Record AUC/A of $33.6 trillion, up 8%, reflecting higher market values and business growth. |
Investment Management
• | Total revenue increased 3%. |
• | Income before taxes increased 11%. |
• | AUM of $1.8 trillion increased 2% primarily reflecting higher market values and the favorable impact of a weaker U.S. dollar (principally versus the British pound), partially offset by the divestiture of CenterSquare Investment Management (“CenterSquare”), net outflows and other changes. |
See “Review of businesses” and Note 19 for additional information on our businesses.
BNY Mellon 5
Fee and other revenue
Fee and other revenue | YTD18 | |||||||||||||||||||||
2Q18 vs. | vs. | |||||||||||||||||||||
(dollars in millions, unless otherwise noted) | 2Q18 | 1Q18 | 2Q17 | 1Q18 | 2Q17 | YTD18 | YTD17 | YTD17 | ||||||||||||||
Investment services fees: | ||||||||||||||||||||||
Asset servicing (a) | $ | 1,157 | $ | 1,168 | $ | 1,085 | (1 | )% | 7 | % | $ | 2,325 | $ | 2,148 | 8 | % | ||||||
Clearing services | 392 | 414 | 394 | (5 | ) | (1 | ) | 806 | 770 | 5 | ||||||||||||
Issuer services | 266 | 260 | 241 | 2 | 10 | 526 | 492 | 7 | ||||||||||||||
Treasury services | 140 | 138 | 140 | 1 | — | 278 | 279 | — | ||||||||||||||
Total investment services fees | 1,955 | 1,980 | 1,860 | (1 | ) | 5 | 3,935 | 3,689 | 7 | |||||||||||||
Investment management and performance fees | 910 | 960 | 879 | (5 | ) | 4 | 1,870 | 1,721 | 9 | |||||||||||||
Foreign exchange and other trading revenue | 187 | 209 | 165 | (11 | ) | 13 | 396 | 329 | 20 | |||||||||||||
Financing-related fees | 53 | 52 | 53 | 2 | — | 105 | 108 | (3 | ) | |||||||||||||
Distribution and servicing | 34 | 36 | 41 | (6 | ) | (17 | ) | 70 | 82 | (15 | ) | |||||||||||
Investment and other income | 70 | 82 | 122 | N/M | N/M | 152 | 199 | N/M | ||||||||||||||
Total fee revenue | 3,209 | 3,319 | 3,120 | (3 | ) | 3 | 6,528 | 6,128 | 7 | |||||||||||||
Net securities gains (losses) | 1 | (49 | ) | — | N/M | N/M | (48 | ) | 10 | N/M | ||||||||||||
Total fee and other revenue | $ | 3,210 | $ | 3,270 | $ | 3,120 | (2 | )% | 3 | % | $ | 6,480 | $ | 6,138 | 6 | % | ||||||
Fee revenue as a percentage of total revenue | 78 | % | 79 | % | 79 | % | 78 | % | 79 | % | ||||||||||||
AUM at period end (in billions) (b) | $ | 1,805 | $ | 1,868 | $ | 1,771 | (3 | )% | 2 | % | $ | 1,805 | $ | 1,771 | 2 | % | ||||||
AUC/A at period end (in trillions) (c) | $ | 33.6 | $ | 33.5 | $ | 31.1 | — | % | 8 | % | $ | 33.6 | $ | 31.1 | 8 | % | ||||||
(a) | Asset servicing fees include securities lending revenue of $60 million in the second quarter of 2018, $55 million in the first quarter of 2018, $48 million in the second quarter of 2017, $115 million in the first six months of 2018 and $97 million in the first six months of 2017. |
(b) | Excludes securities lending cash management assets and assets managed in the Investment Services business. |
(c) | Includes the AUC/A of CIBC Mellon of $1.4 trillion at June 30, 2018, $1.3 trillion at March 31, 2018 and $1.2 trillion at June 30, 2017. |
N/M - Not meaningful.
Fee and other revenue increased 3% compared with the second quarter of 2017 and decreased 2% (unannualized) compared with the first quarter of 2018. The increase compared with the second quarter of 2017 primarily reflects higher asset servicing fees, investment management and performance fees, issuer services fees and foreign currency and other trading revenue, partially offset by lower investment and other income. The decrease compared with the first quarter of 2018 primarily reflects lower investment management and performance fees, clearing services and foreign exchange and other trading revenue, partially offset by net securities losses recorded in the first quarter of 2018.
Investment services fees
Investment services fees were impacted by the following compared with the second quarter of 2017 and the first quarter of 2018:
• | Asset servicing fees increased 7% compared with the second quarter of 2017 and decreased 1% (unannualized) compared with the first quarter of 2018. The increase compared with the second |
quarter of 2017 primarily reflects growth in collateral management, higher securities lending volume and equity market values as well as the favorable impact of a weaker U.S. dollar.
• | Clearing services fees decreased 1% compared with the second quarter of 2017 and 5% (unannualized) compared with the first quarter of 2018. The decrease compared with the second quarter of 2017 was primarily driven by the impact of the previously disclosed lost business, partially offset by growth in long-term mutual fund balances. The decrease compared with the first quarter of 2018 primarily reflects lower clearance revenue. |
• | Issuer services fees increased 10% compared with the second quarter of 2017 and 2% (unannualized) compared with the first quarter of 2018. Both increases primarily reflect higher Depository Receipts revenue. |
• | Treasury services fees were unchanged compared with the second quarter of 2017 and increased 1% (unannualized) compared with the first quarter of 2018. Both comparisons reflect higher payment volumes partially offset by higher compensating |
6 BNY Mellon
balance credits provided to clients, which reduce fee revenue and increase net interest revenue.
See the “Investment Services business” in “Review of businesses” for additional details.
Investment management and performance fees
Investment management and performance fees increased 4% compared with the second quarter of 2017 and decreased 5% (unannualized) compared with the first quarter of 2018. On a constant currency basis (Non-GAAP), investment management and performance fees increased 1% compared with the second quarter of 2017. Performance fees were $12 million in the second quarter of 2018, $17 million in the second quarter of 2017 and $48 million in the first quarter of 2018.
AUM was $1.8 trillion, an increase of 2% compared with June 30, 2017 and a decrease of 3% compared with March 31, 2018. See the “Investment Management business” in “Review of businesses” for additional details regarding the drivers of investment management and performance fees, AUM and AUM flows.
Foreign exchange and other trading revenue
Foreign exchange and other trading revenue | |||||||||||||||
(in millions) | 2Q18 | 1Q18 | 2Q17 | YTD18 | YTD17 | ||||||||||
Foreign exchange | $ | 171 | $ | 183 | $ | 151 | $ | 354 | $ | 305 | |||||
Other trading revenue | 16 | 26 | 14 | 42 | 24 | ||||||||||
Total foreign exchange and other trading revenue | $ | 187 | $ | 209 | $ | 165 | $ | 396 | $ | 329 | |||||
Foreign exchange revenue is primarily driven by the volume of client transactions and the spread realized on these transactions, both of which are impacted by market volatility, and the impact of foreign currency hedging activities. Foreign exchange revenue increased 13% compared with the second quarter of 2017 and decreased 7% (unannualized) compared with the first quarter of 2018. The increase compared with second quarter of 2017 primarily reflects higher volumes. The decrease compared with the first quarter of 2018 primarily reflects lower gains on foreign currency hedging activities and lower volatility. Foreign exchange revenue is primarily reported in the Investment Services business and, to a
lesser extent, the Investment Management business and the Other segment.
Distribution and servicing fees
The decrease in distribution and servicing fees compared with the second quarter of 2017 primarily reflects lower fees from money market funds.
Investment and other income
The following table provides the components of investment and other income.
Investment and other income | |||||||||||||||
(in millions) | 2Q18 | 1Q18 | 2Q17 | YTD18 | YTD17 | ||||||||||
Corporate/bank-owned life insurance | $ | 31 | $ | 36 | $ | 43 | $ | 67 | $ | 73 | |||||
Asset-related gains (losses) | 15 | 46 | (5 | ) | 61 | (2 | ) | ||||||||
Expense reimbursements from joint venture | 19 | 16 | 17 | 35 | 31 | ||||||||||
Seed capital gains (a) | 3 | — | 10 | 3 | 19 | ||||||||||
Equity investment income | 2 | — | 7 | 2 | 33 | ||||||||||
Lease-related gains | — | — | 51 | — | 52 | ||||||||||
Other income (loss) | — | (16 | ) | (1 | ) | (16 | ) | (7 | ) | ||||||
Total investment and other income | $ | 70 | $ | 82 | $ | 122 | $ | 152 | $ | 199 | |||||
(a) | Excludes seed capital gains related to consolidated investment management funds, which are reflected in operations of consolidated investment management funds. |
Investment and other income decreased compared with both the second quarter of 2017 and first quarter of 2018. The decrease compared with the second quarter of 2017 primarily reflects lease-related gains recorded in the second quarter of 2017, lower income from corporate/bank-owned life insurance and losses on increased investments in renewable energy, partially offset by foreign currency translation gains. Pre-tax losses on our renewable energy investments are offset by corresponding tax benefits and credits. The decrease compared with the first quarter of 2018 primarily reflects lower asset-related gains, partially offset by higher other income driven by foreign currency translation gains.
Year-to-date 2018 compared with year-to-date 2017
Fee and other revenue increased 6% in the first six months of 2018, compared with the first six months of 2017, primarily reflecting higher asset servicing fees, investment management and performance fees, foreign exchange and other trading revenue, partially
BNY Mellon 7
offset by net securities losses and lower investment and other income. The 8% increase in asset servicing fees primarily reflects higher equity market values, the favorable impact of a weaker U.S. dollar and higher securities lending volume. The 9% increase in investment management and performance fees primarily reflects higher equity market values, the favorable impact of a weaker U.S. dollar (principally versus the British pound) and higher performance fees. The 20% increase in foreign exchange and
other trading revenue primarily reflects higher volumes. Net securities losses primarily reflect losses recorded in the first quarter of 2018 related to the sale of debt securities. The decrease in investment and other income primarily reflects lease-related gains and a net gain related to an equity investment, both recorded in the first six months of 2017, and lower other income due in part to our investments in renewable energy, partially offset by an increase in asset-related gains.
Net interest revenue
Net interest revenue | YTD18 | |||||||||||||||||||||
2Q18 vs. | vs. | |||||||||||||||||||||
(dollars in millions) | 2Q18 | 1Q18 | 2Q17 | 1Q18 | 2Q17 | YTD18 | YTD17 | YTD17 | ||||||||||||||
Net interest revenue | $ | 916 | $ | 919 | $ | 826 | — | 11 | % | $ | 1,835 | $ | 1,618 | 13 | % | |||||||
Add: Tax equivalent adjustment | 5 | 6 | 12 | N/M | N/M | 11 | 24 | N/M | ||||||||||||||
Net interest revenue (FTE) – Non-GAAP (a) | $ | 921 | $ | 925 | $ | 838 | — | 10 | % | $ | 1,846 | $ | 1,642 | 12 | % | |||||||
Average interest-earning assets | $ | 292,086 | $ | 302,069 | $ | 289,496 | (3 | )% | 1 | % | $ | 297,050 | $ | 286,475 | 4 | % | ||||||
Net interest margin | 1.26 | % | 1.22 | % | 1.14 | % | 4 | bps | 12 | bps | 1.24 | % | 1.14 | % | 10 | bps | ||||||
Net interest margin (FTE) – Non-GAAP (a) | 1.26 | % | 1.23 | % | 1.16 | % | 3 | bps | 10 | bps | 1.25 | % | 1.15 | % | 10 | bps | ||||||
(a) | Net interest revenue (FTE) – Non-GAAP and net interest margin (FTE) – Non-GAAP include the tax equivalent adjustments on tax-exempt income which allows for comparisons 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. |
N/M - Not meaningful.
bps - basis points.
Net interest revenue increased 11% compared with the second quarter of 2017 and decreased less than 1% (unannualized) compared with the first quarter of 2018. The increase compared with the second quarter of 2017 primarily reflects higher interest rates. The decrease compared with the first quarter of 2018 was primarily driven by a lower level of deposits, partially offset by higher interest rates.
Net interest margin increased 12 basis points compared with the second quarter of 2017 and 4 basis points compared with the first quarter of 2018. Both increases primarily reflect higher interest rates.
Average non-U.S. dollar deposits comprised approximately 30% of our average total deposits in the second quarter of 2018. Approximately 40% of the average non-U.S. dollar deposits in the second quarter of 2018 were euro-denominated.
Year-to-date 2018 compared with year-to-date 2017
Net interest revenue increased 13% in the first six months of 2018 compared with the first six months of 2017, primarily driven by higher interest rates and interest-earning assets. The increase in the net interest margin was primarily driven by the factors listed above.
8 BNY Mellon
Average balances and interest rates | Quarter ended | |||||||||||||||||||||||||
June 30, 2018 | March 31, 2018 | June 30, 2017 | ||||||||||||||||||||||||
(dollars in millions, presented on an FTE basis) | Average balance | Interest | Average rates | Average balance | Interest | Average rates | Average balance | Interest | Average rates | |||||||||||||||||
Assets | ||||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||||
Interest-bearing deposits with banks (primarily foreign banks) | $ | 15,748 | $ | 56 | 1.41 | % | $ | 13,850 | $ | 42 | 1.25 | % | $ | 14,832 | $ | 27 | 0.73 | % | ||||||||
Interest-bearing deposits held at the Federal Reserve and other central banks | 69,676 | 136 | 0.77 | 79,068 | 126 | 0.64 | 69,316 | 71 | 0.41 | |||||||||||||||||
Federal funds sold and securities purchased under resale agreements (a) | 28,051 | 230 | 3.29 | 27,903 | 170 | 2.47 | 26,873 | 86 | 1.29 | |||||||||||||||||
Margin loans | 14,838 | 128 | 3.46 | 15,674 | 115 | 2.98 | 15,058 | 87 | 2.32 | |||||||||||||||||
Non-margin loans: | ||||||||||||||||||||||||||
Domestic offices | 29,970 | 257 | 3.44 | 30,415 | 228 | 3.02 | 30,734 | 207 | 2.70 | |||||||||||||||||
Foreign offices | 12,258 | 88 | 2.87 | 12,517 | 77 | 2.51 | 13,001 | 65 | 1.99 | |||||||||||||||||
Total non-margin loans | 42,228 | 345 | 3.27 | 42,932 | 305 | 2.87 | 43,735 | 272 | 2.49 | |||||||||||||||||
Securities: | ||||||||||||||||||||||||||
U.S. Government obligations | 23,199 | 116 | 2.02 | 23,460 | 109 | 1.88 | 25,928 | 106 | 1.64 | |||||||||||||||||
U.S. Government agency obligations | 63,022 | 374 | 2.37 | 62,975 | 350 | 2.23 | 59,533 | 290 | 1.95 | |||||||||||||||||
State and political subdivisions – tax-exempt (b) | 2,677 | 18 | 2.75 | 2,875 | 19 | 2.62 | 3,298 | 26 | 3.09 | |||||||||||||||||
Other securities | 28,863 | 126 | 1.75 | 29,149 | 123 | 1.69 | 28,468 | 81 | 1.15 | |||||||||||||||||
Trading securities (b) | 3,784 | 29 | 3.10 | 4,183 | 28 | 2.62 | 2,455 | 18 | 2.85 | |||||||||||||||||
Total securities | 121,545 | 663 | 2.19 | 122,642 | 629 | 2.05 | 119,682 | 521 | 1.74 | |||||||||||||||||
Total interest-earning assets (b) | $ | 292,086 | $ | 1,558 | 2.14 | % | $ | 302,069 | $ | 1,387 | 1.85 | % | $ | 289,496 | $ | 1,064 | 1.47 | % | ||||||||
Noninterest-earnings assets | 54,242 | 56,106 | 53,019 | |||||||||||||||||||||||
Total assets | $ | 346,328 | $ | 358,175 | $ | 342,515 | ||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||||
Interest-bearing deposits: | ||||||||||||||||||||||||||
Domestic offices | $ | 54,200 | $ | 105 | 0.78 | % | $ | 51,612 | $ | 71 | 0.55 | % | $ | 48,809 | $ | 20 | 0.17 | % | ||||||||
Foreign offices | 98,599 | 68 | 0.28 | 104,092 | 46 | 0.18 | 93,527 | 12 | 0.05 | |||||||||||||||||
Total interest-bearing deposits | 152,799 | 173 | 0.45 | 155,704 | 117 | 0.30 | 142,336 | 32 | 0.09 | |||||||||||||||||
Federal funds purchased and securities sold under repurchase agreements (a) | 18,146 | 158 | 3.48 | 18,963 | 107 | 2.29 | 17,970 | 38 | 0.84 | |||||||||||||||||
Trading liabilities | 1,198 | 7 | 2.43 | 1,569 | 9 | 2.26 | 1,216 | 2 | 0.61 | |||||||||||||||||
Other borrowed funds | 2,399 | 14 | 2.40 | 2,119 | 9 | 1.67 | 1,193 | 4 | 1.24 | |||||||||||||||||
Commercial paper | 3,869 | 21 | 2.13 | 3,131 | 12 | 1.59 | 2,215 | 5 | 0.95 | |||||||||||||||||
Payables to customers and broker-dealers | 16,349 | 45 | 1.10 | 17,101 | 31 | 0.75 | 20,609 | 16 | 0.30 | |||||||||||||||||
Long-term debt | 28,349 | 219 | 3.06 | 28,407 | 177 | 2.49 | 27,398 | 129 | 1.87 | |||||||||||||||||
Total interest-bearing liabilities | $ | 223,109 | $ | 637 | 1.14 | % | $ | 226,994 | $ | 462 | 0.82 | % | $ | 212,937 | $ | 226 | 0.42 | % | ||||||||
Total noninterest-bearing deposits | 64,768 | 71,005 | 73,886 | |||||||||||||||||||||||
Other noninterest-bearing liabilities | 16,857 | 18,571 | 15,656 | |||||||||||||||||||||||
Total liabilities | 304,734 | 316,570 | 302,479 | |||||||||||||||||||||||
Temporary equity | ||||||||||||||||||||||||||
Redeemable noncontrolling interests | 184 | 193 | 172 | |||||||||||||||||||||||
Permanent equity | ||||||||||||||||||||||||||
Total The Bank of New York Mellon Corporation shareholders’ equity | 41,292 | 41,135 | 39,404 | |||||||||||||||||||||||
Noncontrolling interests | 118 | 277 | 460 | |||||||||||||||||||||||
Total permanent equity | 41,410 | 41,412 | 39,864 | |||||||||||||||||||||||
Total liabilities, temporary equity and permanent equity | $ | 346,328 | $ | 358,175 | $ | 342,515 | ||||||||||||||||||||
Net interest revenue (FTE) – Non-GAAP | $ | 921 | $ | 925 | $ | 838 | ||||||||||||||||||||
Net interest margin (FTE) – Non-GAAP | 1.26 | % | 1.23 | % | 1.16 | % | ||||||||||||||||||||
Less: Tax equivalent adjustment (c) | 5 | 6 | 12 | |||||||||||||||||||||||
Net interest revenue – GAAP | $ | 916 | $ | 919 | $ | 826 | ||||||||||||||||||||
Net interest margin – GAAP | 1.26 | % | 1.22 | % | 1.14 | % | ||||||||||||||||||||
(a) | Includes the impact of offsetting under enforceable netting agreements of approximately $18 billion for the second quarter of 2018, $14 billion for the first quarter of 2018 and $1 billion for the second quarter of 2017. |
(b) | Interest income and average yields are presented on an FTE basis (Non-GAAP). |
(c) | The tax equivalent adjustment relates to tax-exempt securities, primarily state and political subdivisions, and is based on the federal statutory tax rate of 21% for the quarters in 2018 and 35% for the quarter in 2017, adjusted for applicable state income taxes, net of the related federal tax benefit. |
BNY Mellon 9
Average balances and interest rates | Year-to-date | ||||||||||||||||
June 30, 2018 | June 30, 2017 | ||||||||||||||||
(dollars in millions, presented on an FTE basis) | Average balance | Interest | Average rates | Average balance | Interest | Average rates | |||||||||||
Assets | |||||||||||||||||
Interest-earning assets: | |||||||||||||||||
Interest-bearing deposits with banks (primarily foreign banks) | $ | 14,804 | $ | 98 | 1.33 | % | $ | 14,773 | $ | 49 | 0.66 | % | |||||
Interest-bearing deposits held at the Federal Reserve and other central banks | 74,346 | 262 | 0.70 | 67,689 | 128 | 0.38 | |||||||||||
Federal funds sold and securities purchased under resale agreements (a) | 27,978 | 400 | 2.88 | 26,097 | 153 | 1.18 | |||||||||||
Margin loans | 15,254 | 243 | 3.21 | 15,403 | 162 | 2.12 | |||||||||||
Non-margin loans: | |||||||||||||||||
Domestic offices | 30,191 | 485 | 3.23 | 30,848 | 395 | 2.57 | |||||||||||
Foreign offices | 12,387 | 165 | 2.68 | 13,297 | 122 | 1.85 | |||||||||||
Total non-margin loans | 42,578 | 650 | 3.07 | 44,145 | 517 | 2.35 | |||||||||||
Securities: | |||||||||||||||||
U.S. Government obligations | 23,329 | 225 | 1.95 | 26,083 | 210 | 1.62 | |||||||||||
U.S. Government agency obligations | 62,998 | 724 | 2.30 | 58,202 | 561 | 1.93 | |||||||||||
State and political subdivisions – tax-exempt (b) | 2,776 | 37 | 2.68 | 3,335 | 52 | 3.10 | |||||||||||
Other securities | 29,005 | 249 | 1.72 | 28,393 | 169 | 1.20 | |||||||||||
Trading securities (b) | 3,982 | 57 | 2.85 | 2,355 | 35 | 2.98 | |||||||||||
Total securities | 122,090 | 1,292 | 2.12 | 118,368 | 1,027 | 1.74 | |||||||||||
Total interest-earning assets (b) | $ | 297,050 | $ | 2,945 | 1.99 | % | $ | 286,475 | $ | 2,036 | 1.43 | % | |||||
Noninterest-earnings assets | 55,169 | 52,900 | |||||||||||||||
Total assets | $ | 352,219 | $ | 339,375 | |||||||||||||
Liabilities | |||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||
Interest-bearing deposits: | |||||||||||||||||
Domestic offices | $ | 52,914 | $ | 176 | 0.67 | % | $ | 49,104 | $ | 35 | 0.14 | % | |||||
Foreign offices | 101,330 | 114 | 0.23 | 91,980 | 6 | 0.01 | |||||||||||
Total interest-bearing deposits | 154,244 | 290 | 0.38 | 141,084 | 41 | 0.06 | |||||||||||
Federal funds purchased and securities sold under repurchase agreements (a) | 18,552 | 265 | 2.88 | 18,480 | 62 | 0.67 | |||||||||||
Trading liabilities | 1,382 | 16 | 2.33 | 1,063 | 4 | 0.73 | |||||||||||
Other borrowed funds | 2,260 | 23 | 2.06 | 1,009 | 6 | 1.13 | |||||||||||
Commercial paper | 3,502 | 33 | 1.89 | 2,190 | 10 | 0.91 | |||||||||||
Payables to customers and broker-dealers | 16,723 | 76 | 0.92 | 19,789 | 23 | 0.23 | |||||||||||
Long-term debt | 28,378 | 396 | 2.78 | 26,644 | 248 | 1.86 | |||||||||||
Total interest-bearing liabilities | $ | 225,041 | $ | 1,099 | 0.98 | % | $ | 210,259 | $ | 394 | 0.38 | % | |||||
Total noninterest-bearing deposits | 67,869 | 73,721 | |||||||||||||||
Other noninterest-bearing liabilities | 17,710 | 15,750 | |||||||||||||||
Total liabilities | 310,620 | 299,730 | |||||||||||||||
Temporary equity | |||||||||||||||||
Redeemable noncontrolling interests | 188 | 167 | |||||||||||||||
Permanent equity | |||||||||||||||||
Total The Bank of New York Mellon Corporation shareholders’ equity | 41,214 | 38,958 | |||||||||||||||
Noncontrolling interests | 197 | 520 | |||||||||||||||
Total permanent equity | 41,411 | 39,478 | |||||||||||||||
Total liabilities, temporary equity and permanent equity | $ | 352,219 | $ | 339,375 | |||||||||||||
Net interest revenue (FTE) – Non-GAAP | $ | 1,846 | $ | 1,642 | |||||||||||||
Net interest margin (FTE) – Non-GAAP | 1.25 | % | 1.15 | % | |||||||||||||
Less: Tax equivalent adjustment (c) | 11 | 24 | |||||||||||||||
Net interest revenue – GAAP | $ | 1,835 | $ | 1,618 | |||||||||||||
Net interest margin – GAAP | 1.24 | % | 1.14 | % | |||||||||||||
(a) | Includes the impact of offsetting under enforceable netting agreements of approximately $16 billion for the first six months of 2018 and $1 billion for the first six months of 2017. |
(b) | Interest income and average yields are presented on an FTE basis (Non-GAAP). |
(c) | The tax equivalent adjustment relates to tax-exempt securities, primarily state and political subdivisions, and is based on the federal statutory tax rate of 21% for year-to-date 2018 and 35% for year-to-date 2017, adjusted for applicable state income taxes, net of the related federal tax benefit. |
10 BNY Mellon
Noninterest expense
Noninterest expense | YTD18 | |||||||||||||||||||||
2Q18 vs. | vs. | |||||||||||||||||||||
(dollars in millions) | 2Q18 | 1Q18 | 2Q17 | 1Q18 | 2Q17 | YTD18 | YTD17 | YTD17 | ||||||||||||||
Staff (a) | $ | 1,489 | $ | 1,576 | $ | 1,432 | (6 | )% | 4 | % | $ | 3,065 | $ | 2,920 | 5 | % | ||||||
Professional, legal and other purchased services | 328 | 291 | 319 | 13 | 3 | 619 | 632 | (2 | ) | |||||||||||||
Software | 192 | 173 | 173 | 11 | 11 | 365 | 339 | 8 | ||||||||||||||
Net occupancy | 156 | 139 | 140 | 12 | 11 | 295 | 276 | 7 | ||||||||||||||
Sub-custodian and clearing (b) | 110 | 119 | 108 | (8 | ) | 2 | 229 | 211 | 9 | |||||||||||||
Distribution and servicing | 106 | 106 | 104 | — | 2 | 212 | 204 | 4 | ||||||||||||||
Furniture and equipment | 74 | 61 | 59 | 21 | 25 | 135 | 116 | 16 | ||||||||||||||
Business development | 62 | 51 | 63 | 22 | (2 | ) | 113 | 114 | (1 | ) | ||||||||||||
Bank assessment charges | 47 | 52 | 59 | (10 | ) | (20 | ) | 99 | 116 | (15 | ) | |||||||||||
Amortization of intangible assets | 48 | 49 | 53 | (2 | ) | (9 | ) | 97 | 105 | (8 | ) | |||||||||||
Other (a)(b)(c) | 135 | 122 | 145 | 11 | (7 | ) | 257 | 264 | (3 | ) | ||||||||||||
Total noninterest expense | $ | 2,747 | $ | 2,739 | $ | 2,655 | — | % | 3 | % | $ | 5,486 | $ | 5,297 | 4 | % | ||||||
Full-time employees at period end | 52,000 | 52,100 | 52,800 | — | % | (2 | )% | |||||||||||||||
(a) | In the first quarter of 2018, we adopted new accounting guidance included in Accounting Standards Update (“ASU”) 2017-07, Compensation-Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which required the reclassification of the components of pension and other postretirement costs, other than the service cost component. As a result, staff expense increased and other expense decreased. Prior periods have been reclassified. For additional information, see Note 2 of the Notes to Consolidated Financial Statements. |
(b) | Beginning in the first quarter of 2018, clearing expense, which was previously included in other expense, was included with sub-custodian expense. Prior periods were reclassified. |
(c) | Beginning in the first quarter of 2018, merger and integration (“M&I”), litigation and restructuring charges are no longer separately disclosed. Expenses previously reported in this line have been reclassified to existing expense categories, primarily other expense. |
Total noninterest expense increased 3% compared with the second quarter of 2017 and increased slightly compared with the first quarter of 2018. The increase compared with the second quarter of 2017 primarily reflects investments in technology, which impacted staff, professional, legal and other purchased services, software and furniture and equipment expenses. The increase also reflects the unfavorable impact of a weaker U.S. dollar and expenses associated with the continued consolidation of our real estate, partially offset by decreases in other expense categories. The increase compared with the first quarter of 2018 primarily reflects investments in technology and expenses associated with the continued consolidation of our real estate. These expenses were partially offset by lower staff expense, primarily driven by the impact of vesting of long-term stock awards for retirement eligible employees recorded in the first quarter of 2018, and the favorable impact of a stronger U.S. dollar.
We expect to continue to incur additional expenses as we invest in our technology infrastructure and platforms. We also expect to incur expenses related to relocating our corporate headquarters, which is estimated to total $75 million, of which $12 million was recorded in the second quarter of 2018. We
expect the remaining expenses related to relocating our corporate headquarters to be recorded in the fourth quarter of 2018.
Year-to-date 2018 compared with year-to-date 2017
Noninterest expense increased 4% compared with the first six months of 2017. The increase primarily reflects investments in technology, the unfavorable impact of a weaker U.S. dollar, expenses associated with the continued consolidation of our real estate and higher volume-related sub-custodian and clearing expenses, partially offset by lower consulting expense and decreases in other expenses.
Income taxes
BNY Mellon recorded an income tax provision of $286 million (20.5% effective tax rate) in the second quarter of 2018, $332 million (25.4% effective tax rate) in the second quarter of 2017 and $282 million (19.5% effective tax rate) in the first quarter of 2018. The lower effective tax rate in the second quarter of 2018 compared with the second quarter of 2017 reflects the decrease in the federal statutory tax rate resulting from U.S. tax legislation. For additional
BNY Mellon 11
information, see Note 11 of the Notes to Consolidated Financial Statements.
We expect the effective tax rate to be approximately 21% in 2018.
Review of businesses
We have an internal information system that produces performance data along product and service lines for our two principal businesses, Investment Services and Investment Management, 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 products and services in each line of business, 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 when organizational changes are made. There were no significant organizational changes in the second quarter of 2018. The results are also subject to refinements in revenue and expense allocation methodologies, which are typically reflected on a prospective basis.
The results of our businesses may be influenced by client and other activities that vary by quarter. In the first quarter, incentive expense typically increases reflecting the vesting of long-term stock awards for
retirement-eligible employees. In the third quarter, Depositary Receipts revenue is typically higher due to an increased level of client dividend payments. Also in the third quarter, volume-related fees may decline due to reduced client activity. In the third quarter, staff expense typically increases reflecting the annual employee merit increase. 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 and the euro. 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. Overall, currency fluctuations impact the year-over-year growth rate in 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.
Fee revenue in Investment Management, and to a lesser extent in Investment Services, is impacted by the value of market indices. At June 30, 2018, we estimate that a 5% change in global equity markets, spread evenly throughout the year, would impact fee revenue by less than 1% and diluted earnings per common share by $0.03 to $0.05.
See Note 19 of the Notes to Consolidated Financial Statements for the consolidating schedules which show the contribution of our businesses to our overall profitability.
12 BNY Mellon
Investment Services business
YTD18 | ||||||||||||||||||||||||||||
(dollars in millions unless otherwise noted) | 2Q18 vs. | vs. | ||||||||||||||||||||||||||
2Q18 | 1Q18 | 4Q17 | 3Q17 | 2Q17 | 1Q18 | 2Q17 | YTD18 | YTD17 | YTD17 | |||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||||
Investment services fees: | ||||||||||||||||||||||||||||
Asset servicing | $ | 1,135 | $ | 1,143 | $ | 1,106 | $ | 1,081 | $ | 1,061 | (1 | )% | 7 | % | $ | 2,278 | $ | 2,099 | 9 | % | ||||||||
Clearing services | 391 | 414 | 400 | 381 | 393 | (6 | ) | (1 | ) | 805 | 768 | 5 | ||||||||||||||||
Issuer services | 265 | 260 | 196 | 288 | 241 | 2 | 10 | 525 | 491 | 7 | ||||||||||||||||||
Treasury services | 140 | 138 | 136 | 141 | 139 | 1 | 1 | 278 | 278 | — | ||||||||||||||||||
Total investment services fees | 1,931 | 1,955 | 1,838 | 1,891 | 1,834 | (1 | ) | 5 | 3,886 | 3,636 | 7 | |||||||||||||||||
Foreign exchange and other trading revenue | 172 | 169 | 168 | 154 | 145 | 2 | 19 | 341 | 298 | 14 | ||||||||||||||||||
Other (a) | 130 | 126 | 135 | 142 | 136 | 3 | (4 | ) | 256 | 265 | (3 | ) | ||||||||||||||||
Total fee and other revenue | 2,233 | 2,250 | 2,141 | 2,187 | 2,115 | (1 | ) | 6 | 4,483 | 4,199 | 7 | |||||||||||||||||
Net interest revenue | 874 | 844 | 813 | 777 | 761 | 4 | 15 | 1,718 | 1,468 | 17 | ||||||||||||||||||
Total revenue | 3,107 | 3,094 | 2,954 | 2,964 | 2,876 | — | 8 | 6,201 | 5,667 | 9 | ||||||||||||||||||
Provision for credit losses | 1 | (7 | ) | (2 | ) | (2 | ) | (3 | ) | N/M | N/M | (6 | ) | (3 | ) | N/M | ||||||||||||
Noninterest expense (excluding amortization of intangible assets) | 1,931 | 1,913 | 2,060 | 1,837 | 1,889 | 1 | 2 | 3,844 | 3,701 | 4 | ||||||||||||||||||
Amortization of intangible assets | 36 | 36 | 37 | 37 | 38 | — | (5 | ) | 72 | 75 | (4 | ) | ||||||||||||||||
Total noninterest expense | 1,967 | 1,949 | 2,097 | 1,874 | 1,927 | 1 | 2 | 3,916 | 3,776 | 4 | ||||||||||||||||||
Income before taxes | $ | 1,139 | $ | 1,152 | $ | 859 | $ | 1,092 | $ | 952 | (1 | )% | 20 | % | $ | 2,291 | $ | 1,894 | 21 | % | ||||||||
Pre-tax operating margin | 37 | % | 37 | % | 29 | % | 37 | % | 33 | % | 37 | % | 33 | % | ||||||||||||||
Securities lending revenue | $ | 55 | $ | 48 | $ | 45 | $ | 41 | $ | 42 | 15 | % | 31 | % | $ | 103 | $ | 82 | 26 | % | ||||||||
Total revenue by line of business: | ||||||||||||||||||||||||||||
Asset Servicing | $ | 1,520 | $ | 1,519 | $ | 1,459 | $ | 1,420 | $ | 1,378 | — | % | 10 | % | $ | 3,039 | $ | 2,724 | 12 | % | ||||||||
Pershing | 558 | 581 | 569 | 542 | 547 | (4 | ) | 2 | 1,139 | 1,069 | 7 | |||||||||||||||||
Issuer Services | 431 | 418 | 352 | 442 | 398 | |||||||||||||||||||||||