News Column

BNY Q2 profits decline amid pressure, charges

July 19, 2014

By Patricia Sabatini, Pittsburgh Post-Gazette

July 19--Bank of New York Mellon, which Friday reported profits slumped 33 percent in the second quarter, said it will hang on to its corporate trust business, which had been under review for a possible sale.

"We decided we couldn't get the kind of premium that we thought this business was worth," chairman and CEO Gerald Hassell told analysts in a conference call.

He said the bank was only willing to sell the unit -- which services corporate and government debt issues and whose profits have been declining -- if it commanded the right price. BNY Mellon acknowledged in May that it was shopping the unit.

"It's a challenging environment for someone to acquire something of this size and complexity," Mr. Hassell said. "I have always liked this business. It has future upside potential" when interest rates begin to rise. "We see light at the end of the tunnel."

BNY Mellon, which has come under some pressure from investors to cut expenses and improve profit margins, earned $554 million, or 48 cents per share, in the second quarter, down from $831 million, or 71 cents, a year earlier.

Excluding special items in both years, the New York trust, custody and asset management giant earned $715 million, or 62 cents per share, vs. $701 million, or 60 cents, in 2013.

Charges in the most recent quarter included severance costs for an undisclosed number of laid-off employees. The move is expected to save about $100 million annually, the company has said.

Revenue for the three months ended June 30 fell 7 percent to $3.7 billion from $4 billion last year. Excluding a gain on an equity investment in the prior year, revenue declined 2 percent.

Earlier this month, activist investor Nelson Peltz revealed the hedge fund he runs had quietly built up a 2.5 percent stake in BNY Mellon.

A spokeswoman for Mr. Peltz, known locally for battling his way onto the board at the H.J. Heinz Co. nearly a decade ago, has said he was looking to discuss ways to grow the business and "enhance shareholder value."

BNY Mellon shares gained 43 cents Friday, or 1.13 percent, to close at $38.43.

Patricia Sabatini: or 412-263-3066.


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Source: Pittsburgh Post-Gazette (PA)

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