The Bank of New York Mellon Corporation (NYSE: BK) reported a 7% decline in earnings for the third quarter of 2019 as interest rate headwinds and deposit mix continued to challenge net interest revenue and asset management continues to be negatively impacted by prior-year outflows. The bottom line exceeded analysts’ expectations while the top line missed consensus estimates.
Net income fell by 7% to $1.04 billion while earnings per share rose by 1% to $1.07 helped by lower average shares outstanding. Total revenue decreased by 5% to $3.86 billion due to lower fees and net interest revenues.
Fee revenue declined by 1% mainly due to cumulative AUM outflows, negative impacts from a strong US dollar and lower performance fees. Net interest revenue dropped 18%, hurt by lease-related impairment, higher interest-bearing deposit and funding costs, and lower non-interest bearing deposit balances.
Assets under custody and/or administration (AUC/A) and assets under management (AUM) both saw single-digit increases, helped by higher market values and net new business.
The businesses were impacted by the translation of results in foreign currencies to the US dollar. The company is primarily impacted by activities denominated in the British pound and the euro. The currency fluctuations impact the year-over-year growth rate in the Investment Management business more than the Investment Services business.
In the Investment Services business, total revenues remained unchanged from last year. Within this business, the company saw revenue growth on a year-over-year basis in most of its divisions except for Asset Servicing and Treasury Services. The decreases in these two divisions were mainly due to lower client activity and net interest revenue.
In the Investment Management business, total revenues decreased by 12%. Within the segment, revenues declined in both the Asset Management and Wealth Management divisions year-over-year due to various factors including impacts from hedging activities and lower net interest revenue.