BNY Mellon Beats Profit Estimates on Higher Interest Rates Boost
Strong Third-Quarter Results Propel BNY Mellon
Bank of New York Mellon Corp exceeded market expectations for its third-quarter profit, driven by the surge in interest rates initiated by the U.S. Federal Reserve. This increase in rates significantly boosted the lender’s income from loans.
Buoyant Market Reacts Positively
Following the release of the impressive results, BNY Mellon’s shares experienced a 2.15% surge in premarket trading, reaching $42.74.
Banks Thrive Amidst Monetary Policy Tightening
Banks, including BNY Mellon, have emerged as the primary beneficiaries of the Federal Reserve’s rapid tightening of U.S. monetary policy. Aimed at curbing inflation, this policy has paved the way for substantial gains in the banking sector. In the latest quarter, JPMorgan, Wells Fargo, and Citigroup outperformed analysts’ predictions and raised their interest income forecasts for FY23.
BNY Mellon’s Impressive Financials
During the reported quarter, BNY Mellon witnessed a nearly 10% surge in net interest revenue, soaring to $1.02 billion compared to $926 million the previous year. This remarkable growth can be attributed to the higher interest rates.
Managing Risks in a Changing Landscape
While the rise in interest rates has undoubtedly benefited banks, concerns about an increase in loan defaults have also intensified. Consequently, lenders have maintained reserves to mitigate potential risks. BNY Mellon set aside $3 million in provision for credit losses for the quarter. This precautionary measure reflects the bank’s commitment to prudently manage its loan portfolio.
Exceeding Expectations: BNY Mellon’s Profits
Adjusted profit for the third quarter stood at $1.27 per share, surpassing analysts’ average estimate of $1.15 per share, as reported by LSEG data. BNY Mellon’s strong financial performance demonstrates its resilience and ability to adapt to the evolving market conditions.
Robust Growth in Revenue and Assets
BNY Mellon’s total revenue increased by 2% to $4.4 billion compared to the previous year. Additionally, the bank witnessed an 8.3% rise in assets under custody or administration (AUC/A), reaching $45.7 trillion. This growth primarily stems from higher market values and client inflows.
Deposits Show a Marginal Decline
Average deposits experienced a slight decline of 5.4% on a sequential basis, settling at $262.1 billion. Despite this decrease, BNY Mellon remains confident in its ability to navigate the changing landscape and deliver value to its customers.
