BNY Mellon 2Q profits suffer from Eurozone crisis
Bank of New York Mellon second quarter profits have fallen, after investors ran to cash on the back of fears about the ongoing Eurozone crisis.
The group’s chief executive Gerald Hassell told Reuters: “Europe is still an absolute mess,” causing investors to seek refuge in cash. Non-interest bearing client deposits at the bank are up 46% on last year to $63bn.
Investment management fees declined 3% on last year to $749m on lower mutual fund revenue, though performance fees tripled to $54m.
The bank’s wealth management unit saw an increase of 13% in average loans, totaling $7.76bn, while average deposits climbed 25% to $11.3bn.
Despite the run to cash, the bank’s investment funds continued to attract net inflows. Long-term flows were $26bn in the quarter, with clients favouring bond funds.
BNY Mellon said its money market funds saw net outflows of $14bn, “as investors looked for higher interest rates in other products”. But as the ECB cut its deposit rate to zero last week, MMF yields run the risk of turning negative, according to Fitch Ratings. Investec AM has already stopped taking new subscriptions for its Euro Liquidity Fund.
Todd Gibbons, BNY Mellon chief financial officer, told Reuters it was possible the bank would impose some kind of charge on euro deposits, though no decision had been made.
BNY Mellon reported quarterly net income of $466m, compared with $735m a year ago. The results included a charge of $212m to settle a lawsuit over a risky investment vehicle that collapsed in 2008.
Quarterly revenue fell to $3.62 billion from $3.85 billion.
BNY Mellon, the world’s largest custody bank, had assets under custody and administration of $27.1trn, up 3% on the previous year.
Foreign exchange revenue was down 15% to $157m.