Bank of New York Mellon Corp. announced Thursday that its fourth-quarter profit dropped 68% from a year earlier as the company took charges on collateralized debt obligations and a conduit it sponsors.
Net income decreased to $520 million, or 45 cents per share, versus $1.63 billion, or $2.27 per share, in the fourth quarter of 2006, when Bank of New York Mellon booked a $1.22 billion gain from the sale of one of its retail units.
The results included a charge of $180 million related to the restructuring and consolidation of the assets of the sponsored conduit, Three Rivers Funding Corp.
Bank of New York Mellon took a $118 million charge to write down the value of its collateralized debt obligations.
"Our fourth-quarter results also include the relative impact of recent market volatility on a small portion of our investment securities portfolio as well as our proactive decision to consolidate a bank-sponsored conduit," Robert Kelly, its chief executive, said in a press release Thursday.
"These actions are consistent with our strategy of aggressively reducing risk and complexity while exiting those businesses that do not support our global growth opportunities in asset management and securities servicing," Mr. Kelly said.
Bank of New York Mellon said that the consolidation of the conduit "was based on the ongoing disruption in the capital markets impacting the funding costs of conduits which is in sharp contrast to the current level of our own funding costs, together with our continuing efforts to exit non-core activities."
According to the company, the $118 million charge reflected markdowns associated with widening spreads on the assets.
Bank of New York Mellon said that there were no downgrades on the assets in the fourth quarter.
The company said that income from continuing operations before items was $700 million, or 61 cents a share, compared with $427 million, or 60 cents a share, a year earlier.
Adjusted for merger and integration costs, fourth-quarter earnings were 67 cents a share.
The CDO writedown lowered earnings from continuing operations by 10 cents a share. Other banks have also taken large writedowns on CDOs that have plunged in value as a result of the credit shakeout and rising mortgage defaults.
Bank of New York Mellon said that its revenue in the fourth quarter rose 12% on a pro-forma basis, to a record $3.82 billion.
Shares of Bank of New York Mellon had declined 1.71% to $44.32 by midday on Thursday.
