State Street Q4 Results Top Estimates, While BNY Mellon Results Miss

(RTTNews) - Custodian banks State Street Corp. (STT) and Bank of New York Mellon Corp., known as BNY Mellon (BK), reported Friday results for the fourth quarter, with profit declining at State Street, hurt by charges. Adjusted results at State Street topped analysts' expectations.

Meanwhile, profit grew at BNY Mellon from last year, reflecting lower provisions for credit losses and income tax as well as an income tax benefit. However, adjusted results at BNY Mellon missed analysts' expectations.

Boston, Massachusetts-based State Street reported net income available to common shareholders of $525 million or $1.24 per share for the fourth quarter, compared to $545 million or $1.22 per share in the prior-year quarter.

Results for the latest quarter primarily include a charge of $0.10 per share to increase legal accrual associated with indirect foreign exchange matters, and a restructuring charge of $0.06 per share related to the completion of the Business Operations and Information Technology Transformation program.

On an operating basis, net income for the quarter was $582 million or $1.37 per share, compared to $514 million or $1.15 per share in the year-ago quarter.

On average, 17 analysts polled by Thomson Reuters expected the company to report earnings of $1.26 per share for the quarter. Analysts' estimates typically exclude special items.

"Our fourth-quarter and full-year 2014 results reflect strength across our asset servicing and asset management businesses," BNY Mellon Chairman, President and CEO Joseph Hooley said.

State Street's total revenues for the quarter increased 6.7 percent to $2.63 billion from $2.46 billion in the previous year. On an operating basis, revenues were $2.72 billion, compared to $2.53 billion in the same quarter last year, and topped fourteen Wall Street analysts' consensus estimate of $2.67 billion.

Net interest revenue decreased to $574 million from $585 million last year. On an operating basis, net interest revenue was $587 million, compared to $596 million, while net interest margin was 1.04 percent, compared to 1.30 percent a year ago.

Provision for loan losses declined to $4 million from $6 million last year, and expenses totaled $1.99 billion, up from last year's $1.85 billion.

Net unrealized gains for the quarter was $487 million, compared to net unrealized losses of $213 million last year.

"We recently submitted our 2015 capital plan for review to the Federal Reserve and continue to emphasize the return of capital to shareholders through dividends and our common stock purchase program. We purchased approximately $410 million of our common stock during the fourth quarter, and $1.23 billion since April 1, 2014, under our current $1.7 billion common stock purchase program, which is effective through March 2015," Hooley added.

Meanwhile, BNY Mellon also reported net income applicable to common shareholders of $807 million or $0.70 per share for the fourth quarter, higher than $513 million or $0.44 per share in the prior-year quarter.

Results for the latest quarter include $0.12 per share of previously disclosed tax benefit, net of litigation and restructuring charges. Excluding items, adjusted net income was $667 million or $0.58 per share, compared to $629 million or $0.54 per share in the prior-year quarter.

On average, 17 analysts polled by Thomson Reuters expected the company to report earnings of $0.59 per share for the quarter.

"Our fourth quarter results also reflect our strong expense discipline and continuing efforts to drive efficiency," BNY Mellon Chairman and CEO Gerald Hassell stated.

The New York-based world's largest custody bank reported that total revenue for the quarter grew 2 percent to $3.69 billion from $3.61 billion, while adjusted revenues, excluding fee and other revenue related to share owner services, were $3.67 billion, compared to $3.77 billion in the same quarter last year. Fourteen Wall Street analysts were looking for revenue of $3.80 billion for the quarter.

Net interest revenue declined 6 percent to $712 million from $761 million, and net interest margin also decreased to 0.91 percent from 1.09 percent in the previous year.

The provision for credit losses was $1 million, down from $6 million in the year-ago quarter, and provision for income taxes declined to $88 million from last year's $172 million. Non-interest expense decreased 5 percent to $2.75 billion from a year ago.

The company also declared a quarterly cash dividend of $0.17 per share, payable on February 13 to shareholders of record as of the close of business on February 3, 2015.

"As we look ahead, we remain confident in our ability to execute our strategic priorities, which include increasing revenue, maintaining a strong capital position and delivering value-added solutions to our clients," Hassell aded.

STT closed Thursday's regular trading session at $77.09, up $1.67 on a volume of 4.10 million shares. In the past 52-week period, the stock has been trading in a range of $62.67 to $80.92.

BK closed at $38.72, up $0.93 on a volume of 6.62 million shares. In the past 52-week period, the stock has been trading in a range of $30.82 to $41.79.