Asset inflows, higher rates push BNY Mellon profit higher

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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.”

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.

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