Rising interest rates pushed Bank of New York Mellon’s second-quarter profit higher, although elevated costs associated with technology investments offset some of the gains.

The $353 billion-asset custody bank reported net income of $1.1 billion, a 14% increase from a year ago. Earnings per share of $1.03 were a penny better than the mean estimate of analysts compiled by FactSet Research Systems.

“We continued to benefit from the positive impact of higher interest rates and equity markets, albeit at a more modest pace than last quarter,” Chairman and CEO Charles Scharf said in a news release. “We saw pockets of strength … especially where we have differentiated capabilities.”

Keeping things in perspective
Bank of New York Mellon got a boost from higher interest rates and busier stock trading, but not as big of one as it did the previous quarter, CEO Charles Scharf said.

Noninterest income, the largest segment of BNY Mellon’s results, rose 3% to $3.2 billion. Asset servicing fees climbed 8% to $1.1 billion, while fees from clearing services increased 5% to $392 million. Investment management fees climbed 9% to $910 million.

Assets under custody and administration rose 8% to $33.6 trillion, a record level for the bank. Assets under management increased 2% to $1.8 trillion.

Revenue derived from foreign exchange and other trading increased 13% to $187 million.

Net interest income improved 11% to $916 million on the effect of higher interest rates. The net interest margin widened 12 basis points to 1.26%.

Noninterest expense rose 3% to $2.7 billion on technology investments, unfavorable impacts from the weaker U.S. dollar and costs associated with consolidating real estate. BNY Mellon paid $75 million to relocate its corporate headquarters and will record the expenses in the second and fourth quarters.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.