Bank of New York Mellon posted a higher profit in the third quarter as a robust stock market, busy customers and new business all helped increase revenue.
The custodian bank’s results joined rival State Street in beating Wall Street expectations and extended earnings for shares of both companies. BNY Mellon and State Street have each grown more than 30% so far this year.
Custodian banks, which track assets and provide other administrative and accounting services for fund managers, have benefited from the turnaround in the financial world from the early days of the coronavirus pandemic. The market is on the rise and more investor money has poured into BNY Mellon client funds. BNY Mellon and State Street are also attracting new business and adding more business for existing clients to its asset servicing divisions.
These same factors have helped improve the performance of their own investment management firms.
“Our financial performance this quarter reflects healthy and widespread organic growth across our business,” said Todd Gibbons, CEO of BNY Mellon, on a call with analysts.
BNY Mellon said on Oct. 19 that net income, attributable to common shareholders, reached $ 943 million, or $ 1.04 per share, in the third quarter, from $ 876 million, or 89 cents, a year earlier . Analysts polled by FactSet had expected earnings of $ 1.01 per share.
Total revenue rose 4.9% to $ 4.04 billion, beating the average analyst estimate of $ 3.95 billion. Commission revenue climbed 8% to $ 3.39 billion.
The bank’s asset management arm increased revenue by 3% and is set to increase new business by nearly 40% this year, Gibbons said. “And we win bigger and more complex contracts that cover our product offering,” he said.
BNY Mellon ended the quarter with $ 45.3 billion in assets under custody, up 17% from the previous year.
BNY Mellon’s investment management business recorded its sixth consecutive quarter of net inflows, where new client money exceeded losses. Revenue rose 12% and assets under management jumped 13% to $ 2.3 billion.
Net interest income, or what the custodian bank pocketed on loans, fell 9% to $ 641 million.
The allowance for credit losses was a benefit of $ 45 million, the company said. It recorded an allowance for credit losses of $ 9 million in the prior year quarter. The company said it saw an improvement in macroeconomic forecasts.
BNY Mellon also said it repurchased about $ 2 billion of the company’s stock during the quarter.
This article was published by Dow Jones