NEW YORK—Bank of New York Mellon Corp. on Wednesday said that its third-quarter earnings rose nearly 5 percent as a gain in fee revenue that the trust bank makes from investment services helped offset higher expenses, including an $80 million litigation bill and costs from the recent departure of its CEO.
The nation's sixth-largest bank reported net income of $651 million, or 53 cents per share. That was up from $622 million, or 51 cents per share, in the same quarter a year ago.
The latest quarter's earnings were slightly higher than the 52 cent-per-share average estimate of analysts surveyed by FactSet.
Revenue rose 8 percent to $3.69 billion, slightly lower than analysts' estimate of nearly $3.70 billion.
Assets under custody and administration climbed to $25.9 trillion as of Sept. 30, a 6 percent increase compared with a year ago, primarily because of new business. But the total was down 2 percent from the end of June, in part due to a 14 percent third-quarter decline in the Standard & Poor's 500 index that reduced the value of stock assets.
Bank of New York Mellon earns fees from services such as banking, stock lending and investment record-keeping for institutions such as pension funds, as well as corporations and wealthy individuals.
Assets that Bank of New York Mellon manages totaled $1.2 trillion, a 5 percent increase from a year ago, but down 6 percent from the end of June.
Investment services fees rose 11 percent year-over-year to $1.8 billion, while investment-management and performance fees rose 5 percent year-over-year to $729 million.
Foreign exchange and other trading revenue jumped 33 percent, but the bank's revenue from investments and other income slipped 8 percent.
Noninterest expenses rose 6 percent from a year ago to $2.77 billion, including $80 million in litigation expenses.
Bank of New York Mellon has been named recently in lawsuits accusing it of overcharging pension funds in Virginia and Florida on foreign currency transactions. Two weeks ago, a federal prosecutor in Manhattan and the New York attorney general filed lawsuits making similar claims.
The bank also recorded a $22 million charge as a result of a change in executive management.
On Aug. 31, Chairman and CEO Robert Kelly stepped down because of what the bank called "differences in approach to managing the company." Gerald Hassell, BNY Mellon's president and a longtime board member, was named to replace Kelly.
The company also reported an 8 percent increase in staff costs. Hassell said severance costs rose during the quarter. The bank announced plans on Aug. 10 to cut about 1,500 jobs, or 3 percent of its workforce.
New business boosted the total of interest-earning assets at Bank of New York Mellon, helping to offset the negative impact to its bottom line from persistently low interest rates. Net interest revenue rose nearly 8 percent to $775 million compared with a year ago, and the average rate earned was 1.30 percent compared with 1.67 percent.
Bank of New York Mellon also said Wednesday that its board declared a quarterly stock dividend of 13 cents per share, the same payout as the preceding quarter. The cash dividend is payable on Nov. 9 to shareholders of record as of Oct. 31.
Its shares rose 10 cents to $19.87 in midday trading Wednesday.
