Bank of New York Mellon reported a benefit of almost a half-billion dollars to its fourth-quarter profit from the new tax law, although restructuring charges offset some of the gain.
Net income at the $372 billion-asset company rose 37% to $1.1 billion from the fourth quarter of 2016. Earnings per share of $1.08 came in 17 cents higher than the mean of analysts’ estimates compiled by FactSet Research Systems.
The Tax Cuts and Jobs Act generated a net benefit of $427 million, or 41 cents per share. BNY Mellon increased the value of its deferred tax liabilities by about $1.2 billion. But the effects of new rules for repatriation taxes and other tax law changes reduced the benefit by about $766 million.
Fee revenue fell 3% to $2.9 billion, largely due to the effects of the new tax law on the value of BNY Mellon’s investments in renewable energy. Investment management and performance fees increased 13% to $962 million. Clearing services rose 13% to $400 million on higher money market fees and growth in mutual fund assets.
Assets under custody and administration rose 11% to $33.3 trillion, as BNY Mellon booked new asset-servicing contracts valued at $575 billion. Assets under management increased 15% to $1.9 trillion.
Net interest revenue rose 2% to $851 million, due to the impact of higher interest rates.
Noninterest expense climbed 14% to $3 billion. The total included $246 million in costs tied to severance, litigation and other charges. The severance involved to changes in senior management and a restructuring of the company’s asset management business, both of which were previously announced.
The asset management restructuring “will improve our position in the marketplace with our clients and the consulting community,” CEO Charles Scharf said during a Thursday conference call.
BNY Mellon combined into one group its three largest asset management divisions: Mellon Capital Management in San Francisco; the fixed-income specialist firm Standish Mellon Asset Management in Boston; and The Boston Co., an active equities manager. The new group has about $560 billion of assets under management.
The reorganization is also intended to “enable us to drive efficiencies by consolidating noninvestment functions, such as trading and operations, to continue the improvement in our margin over time,” Scharf said.