Bank of New York Mellon's quarterly profits tumbled by nearly 60% during the third quarter after the world's largest custody bank recorded a goodwill impairment charge of $680 million.
The impairment, which was associated with the company's investment management line of business, drove a 26% year-over-year increase in noninterest expenses, which in turn pushed quarterly net income down to $388 billion — a decrease of 59% from the year-ago period.
The non-cash charge, which was disclosed Monday in BNY Mellon's quarterly earnings report, did not affect liquidity, tangible common equity or regulatory capital ratios, the company said.
On his first earnings call since
Rather, it is the result of BNY Mellon's "regular impairment testing process," and a reflection of "lower market values" in equity and fixed income markets and a higher discount rate, Vince said.
BNY Mellon has been streamlining its management portfolio for about 15 years, Vince said. When the sale of London-based Alcentra is completed — the deal is expected to close in the first quarter — BNY Mellon will have seven such investment management firms, he said.
Vince, who joined BNY Mellon two years ago after 26 years at Goldman Sachs, where he held roles such as treasurer and chief risk officer, succeeded Todd Gibbons when the latter retired on Aug. 31. During Monday's call, Vince outlined some of his top priorities as CEO.
The list includes reviewing the company's cost base and margins to generate more efficiencies, leveraging the company's interconnected businesses to provide more services to clients and further investing in collateral and custody platforms, digital assets and real-time payments.
"It's apparent to me that while we've made good progress in a number of areas over the last couple of years, there are also clearly opportunities to further enhance BNY Mellon's performance for our clients and shareholders alike," Vince told analysts.
BNY Mellon announced last week that its digital asset custody platform, which has been
"What we heard from our clients is they want institutional grade solutions in the space," he said.
Not everyone has been cheering BNY Mellon's new platform. One day after it was announced, Custodia Bank, a Wyoming-chartered digital asset bank,
BNY Mellon's ambitions go beyond crypto, in part because a recent BNY Mellon survey of large institutional asset managers, asset owners and hedge funds showed that more than 90% are "interested in investing in some type of tokenized asset within the next few years," Vince said Monday. That could mean more demand for the tokenization of all sorts of assets including hard commodities, real estate and different types of currencies, Vince said.
"Now, all of this is over the course of the next few years," he said. "We're not spending a ton of money on it, but we're deliberately investing in smart places in that ecosystem so that we are prepared to be there for our clients over the long term on this important journey."
For the quarter, BNY Mellon reported total revenue of $4.3 billion, up 6% from the third quarter of 2021, in part because of a 44% increase in net interest revenue. Including the goodwill impairment charge, earnings per share were 39 cents, down 63% from the year-ago period.
Noninterest expenses totaled $3.7 billion. Without the impairment charge, expenses rose 4%, mostly as a result of inflation, higher revenue-related costs and higher investments in growth, infrastructure and efficiency initiatives, the company said.
