UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) – July 19, 2018
THE BANK OF NEW YORK MELLON CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
001-35651
13-2614959
(State or other jurisdiction
of incorporation)
(Commission
File Number)
(I.R.S. Employer Identification No.)

240 Greenwich Street
New York, New York 10286
(Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code – (212) 495-1784

225 Liberty Street, New York, New York 10286
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

I ndicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 under the Securities Act (17 CFR 230.405) or Rule 12b-2 under the Exchange Act (17 CFR 240.12b-2).    
Emerging growth company      o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.      o



ITEM 2.02.    RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On July 19, 2018 , The Bank of New York Mellon Corporation (“BNY Mellon”) issued an Earnings Release announcing its financial results for the second quarter of 2018 . A copy of each of the Earnings Release and a Financial Supplement is attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, and is incorporated herein by reference. The quotation included in Exhibit 99.1 (the “Excluded Section”) is “furnished” by this Current Report on Form 8-K pursuant to General Instruction B.2 of Form 8-K and is not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any BNY Mellon filing under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act. The information included in Exhibit 99.1, other than in the Excluded Section, and Exhibit 99.2 is to be considered “filed” under the Exchange Act and is incorporated by reference into all filings made by BNY Mellon under the Securities Act and the Exchange Act that state that this Current Report on Form 8-K is incorporated therein by reference.

ITEM 7.01.    REGULATION FD DISCLOSURE.

On July 19, 2018 , in conjunction with a conference call and webcast regarding BNY Mellon’s financial results, the Earnings Release, the Financial Supplement and a Second Quarter 2018 Financial Highlights presentation are available on BNY Mellon’s website, www.bnymellon.com. A copy of the Second Quarter 2018 Financial Highlights presentation is “furnished” as Exhibit 99.3 to this Current Report on Form 8-K pursuant to General Instruction B.2 of Form 8-K and is not “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section. This exhibit shall not be incorporated by reference into any filings BNY Mellon has made or may make under the Securities Act or Exchange Act, except as otherwise expressly stated in such filing. The contents of BNY Mellon’s website referenced herein and in the exhibits are not incorporated into this Current Report on Form 8-K.

ITEM 9.01.    FINANCIAL STATEMENTS AND EXHIBITS.

Exhibit 99.1 (other than the Excluded Section) and Exhibit 99.2 shall be deemed filed herewith. The Excluded Section and Exhibit 99.3 shall be deemed furnished herewith.

(d)    EXHIBITS.

2




3

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
The Bank of New York Mellon Corporation
(Registrant)



Date: July 19, 2018
By: /s/ Kathleen B. McCabe      
 
Name: Kathleen B. McCabe
Title: Assistant Secretary




4
BNY Mellon 2Q18 Earnings Release

News Release
BNYLOGOA01A53.JPG

BNY MELLON REPORTS SECOND QUARTER 2018 EARNINGS OF
$1.06 BILLION OR $1.03 PER COMMON SHARE

Revenue up 5%
 
EPS up 17%
 
ROE 11%
ROTCE 23% (a)
 
CET1 11.0%
SLR 6.2%

NEW YORK, July 19, 2018 – The Bank of New York Mellon Corporation (“BNY Mellon”) (NYSE: BK) today reported:
 
 
 
 
2Q18 vs.
 
2Q18

1Q18

2Q17

1Q18

2Q17

Net income applicable to common shareholders (in millions)
$
1,055

$
1,135

$
926

(7
)%
14
%
Diluted earnings per common share
$
1.03

$
1.10

$
0.88

(6
)%
17
%

Second Quarter Results

Total revenue of $4.1 billion , increased 5%
•
Fee revenue increased 3%
•
Net interest revenue increased 11%

Total noninterest expense of $2.7 billion , increased 3%
•
Weaker U.S. dollar and real estate consolidation increased expenses ~ 2%
•
Investments in technology were partially offset by decreases in other expenses

Investment Services
•
Total revenue increased 8%
•
Income before taxes increased 20%
•
Record AUC/A of $33.6 trillion , up 8%

Investment Management
•
Total revenue increased 3%
•
Income before taxes increased 11%
•
AUM of $1.8 trillion , up 2%

Returned $895 million to common shareholders
•
Repurchased 12 million common shares for $651 million
•
Paid $244 million in dividends to common shareholders
•
Authorized to repurchase $2.4 billion of common shares through 2Q19 and increased quarterly dividend 17% to $0.28 per common share in 3Q18
 
CEO Commentary

“While we continued to benefit from the positive impact of higher interest rates and equity markets, albeit at a more modest pace than last quarter, we again saw some underlying franchise growth. Overall, the company remains strong, with some areas performing better than others,” Charles W. Scharf, chairman and chief executive officer, said.

“We saw pockets of strength, in Investment Services, especially where we have differentiated capabilities such as clearance, collateral management, tri-party repo and liquidity services. Investment Management growth moderated as we saw some softness across the board in our asset flows,” Mr. Scharf continued.

“We remain disciplined and focused on deploying our resources. Currency translation and real estate costs impacted expense growth by 2 percent and, despite an increase in our investment in technology, all other expenses were up modestly,” Mr. Scharf added.

“Following the release of our CCAR results, we are now authorized to repurchase $2.4 billion in common shares by mid-2019, and we increased our common dividend 17 percent starting this quarter. While we were not surprised by the outcome given the severity of the assumptions in this year’s test, our expectations for returning capital to shareholders over time have not changed,” Mr. Scharf also noted.

“We remain focused on driving organic growth across our businesses. The opportunities in our new business pipeline are encouraging. We are confident that we are taking the right actions to realize them and expect the results to build over time,” Mr. Scharf concluded.

Investor Relations:  Valerie Haertel (212) 635-8529
Media Relations:  Jennifer Hendricks Sullivan (212) 635-1374
(a) For information on this Non-GAAP measure, see “Supplemental information - Explanation of GAAP and Non-GAAP financial measures” beginning on page 11.

Note: Above comparisons are 2Q18 vs. 2Q17.

BNY Mellon 2Q18 Earnings Release

CONSOLIDATED SECOND QUARTER 2018 FINANCIAL HIGHLIGHTS

(dollars in millions, except per share amounts; common shares in thousands)
 
 
 
2Q18 vs.
2Q18

1Q18

2Q17

1Q18

2Q17

Fee revenue
$
3,209

$
3,319

$
3,120

(3
)%
3
 %
Net securities gains (losses)
1

(49
)
—

N/M
N/M
Fee and other revenue
3,210

3,270

3,120

(2
)
3

Income (loss) from consolidated investment management funds
12

(11
)
10

N/M
N/M
Net interest revenue
916

919

826

—

11

Total revenue
4,138

4,178

3,956

(1
)
5

Provision for credit losses
(3
)
(5
)
(7
)
N/M
N/M
Noninterest expense
2,747

2,739

2,655

—

3

Income before income taxes
1,394

1,444

1,308

(3
)
7

Provision for income taxes
286

282

332

1

(14
)
Net income
$
1,108

$
1,162

$
976

(5
)%
14
 %
Net income applicable to common shareholders of The Bank of New York Mellon Corporation
$
1,055

$
1,135

$
926

(7
)%
14
 %
Operating leverage (a)
 
 
 
(125
) bps
113
 bps
Diluted earnings per common share
$
1.03

$
1.10

$
0.88

(6
)%
17
 %
Average common shares and equivalents outstanding - diluted
1,014,357

1,021,731

1,041,879

 
 
Pre-tax operating margin
34
%
35
%
33
%
 
 
(a)
Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense.
N/M – Not meaningful.
bps – basis points.


KEY DRIVERS (comparisons are 2Q18 vs. 2Q17, unless otherwise stated)

•
Total revenue increased 5% primarily reflecting:
•
Fee revenue increased 3% , primarily reflecting higher equity market values, the favorable impact of a weaker U.S. dollar, higher foreign exchange revenue and growth in collateral management, partially offset by lease-related gains recorded in 2Q17.
•
Net interest revenue increased 11% driven by higher interest rates.
•
Noninterest expense increased 3% primarily reflecting investments in technology, expenses associated with the continued consolidation of our real estate and the unfavorable impact of a weaker U.S. dollar, partially offset by decreases in other expenses.
•
Effective tax rate of 20.5% .

Assets under custody and/or administration (“AUC/A”) and Assets under management (“AUM”)
•
Record assets under custody and/or administration of $33.6 trillion , up 8% , reflecting higher market values and business growth.
•
Assets under management of $1.8 trillion increased 2% , primarily reflecting higher market values and the favorable impact of a weaker U.S. dollar (principally versus the British pound), partially offset by the divestiture of CenterSquare Investment Management (“CenterSquare”), net outflows and other changes.

Capital and liquidity
•
Repurchased 12 million common shares for $651 million and paid $244 million in dividends to common shareholders.
•
Return on common equity (“ROE) of 11% ; Return on tangible common equity (“ROTCE”) of 23% (b) .
•
Common Equity Tier 1 (“CET1”) ratio – 11.0% .
•
Supplementary leverage ratio (“SLR”) – 6.2% .
•
Average liquidity coverage ratio (“LCR”) – 118% .
 
(b)
See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 11 for the reconciliation.
Note: Throughout this document, sequential growth rates are unannualized.

Page - 2
BNY Mellon 2Q18 Earnings Release

INVESTMENT SERVICES BUSINESS HIGHLIGHTS

(dollars in millions, unless otherwise noted; not meaningful - N/M)
 
 
 
2Q18 vs.
2Q18

1Q18

2Q17

1Q18

2Q17

Total revenue by line of business:

 
 


Asset Servicing
$
1,520

$
1,519

$
1,378

—
 %
10
 %
Pershing
558

581

547

(4
)
2

Issuer Services
431

418

398

3

8

Treasury Services
329

321

311

2

6

Clearance and Collateral Management
269

255

242

5

11

Total revenue by line of business
3,107

3,094

2,876

—

8

Provision for credit losses
1

(7
)
(3
)
N/M
N/M
Noninterest expense
1,967

1,949

1,927

1

2

Income before taxes
$
1,139

$
1,152

$
952

(1
)%
20
 %
 

 
 


Pre-tax operating margin
37
%
37
%
33
%


 
 
 
 
 
 
Foreign exchange revenue
$
172

$
169

$
145

2
 %
19
 %
Securities lending revenue
$
55

$
48

$
42

15
 %
31
 %
 
 
 
 




Metrics:
 
 
 




Average loans
$
38,002

$
39,200

$
40,931

(3
)%
(7
)%
Average deposits
$
203,064

$
214,130

$
200,417

(5
)%
1
 %



 
 


AUC/A at period end  (in trillions) (current period is preliminary) (a)
$
33.6

$
33.5

$
31.1

—
 %
8
 %
Market value of securities on loan at period end (in billions) (b)
$
432

$
436

$
336

(1
)%
29
 %
 
 
 
 
 
 
Pershing


 
 


Average active clearing accounts (U.S. platform) (in thousands)
6,080

6,075

6,159

—
 %
(1
)%
Average long-term mutual fund assets (U.S. platform)
$
512,645

$
514,542

$
480,532

—
 %
7
 %
Average investor margin loans (U.S. platform)
$
10,772

$
10,930

$
9,812

(1
)%
10
 %



 
 


Clearance and Collateral Management


 
 


Average tri-party collateral management balances (in billions)
$
2,801

$
2,698

$
2,498

4
 %
12
 %
(a)
Includes the AUC/A of CIBC Mellon Global Securities Services Company (“CIBC Mellon”), a joint venture with the Canadian Imperial Bank of Commerce, of $1.4 trillion at June 30, 2018 , $1.3 trillion at March 31, 2018 and $1.2 trillion at June 30, 2017 .
(b)
Represents the total amount of securities on loan in our agency securities lending program managed by the Investment Services business. Excludes securities for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, which totaled $70 billion at June 30, 2018 , $73 billion at March 31, 2018 and $66 billion at June 30, 2017 .


KEY DRIVERS

•
Total revenue increased both year-over-year and sequentially. Net interest revenue increased in most businesses, primarily driven by higher interest rates. The drivers of fee revenue by line of business are indicated below.
•
Asset Servicing - The year-over-year increase primarily reflects higher net interest revenue, foreign exchange and securities lending volumes, equity market values and the favorable impact of a weaker U.S. dollar.
•
Pershing - The year-over-year increase primarily reflects higher net interest revenue and higher fees due to growth in long-term mutual fund balances, partially offset by the impact of lost business. The sequential decrease was primarily driven by lower clearance revenue.
•
Issuer Services - Both increases primarily reflect higher net interest revenue in Corporate Trust and higher Depositary Receipts revenue.
•
Treasury Services - Both increases primarily reflect higher net interest revenue and payment volumes.
•
Clearance and Collateral Management - Both increases primarily reflect growth in collateral management, higher clearance volumes and net interest revenue.

•
Noninterest expense increased year-over-year primarily driven by investments in technology and the unfavorable impact of a weaker U.S. dollar. The sequential increase primarily reflects investments in technology and business development expenses.


Page - 3
BNY Mellon 2Q18 Earnings Release

INVESTMENT MANAGEMENT BUSINESS HIGHLIGHTS

(dollars in millions, unless otherwise noted; not meaningful - N/M)
 
 
 
 
2Q18 vs.
2Q18

1Q18

 
2Q17

1Q18

2Q17

Total revenue by line of business:

 
 
 
 
 
Asset Management
$
702

$
770

 
$
683

(9
)%
3
 %
Wealth Management
316

318

 
303

(1
)
4

Total revenue by line of business
1,018

1,088

 
986

(6
)
3

Provision for credit losses
2

2

 
—

N/M
N/M
Noninterest expense
697

705

 
698

(1
)
—

Income before taxes
$
319

$
381

 
$
288

(16
)%
11
 %


 
 
 
 
 
Pre-tax operating margin
31
%
35
%
 
29
%
 
 
Adjusted pre-tax operating margin – Non-GAAP (a)
35
%
39
%
 
33
%
 
 
 
 
 
 
 
 
 
Metrics:
 
 
 
 
 
 
Average loans
$
16,974

$
16,876

 
$
16,560

1
 %
3
 %
Average deposits
$
14,252

$
13,363

 
$
14,866

7
 %
(4
)%
 

 
 
 


Wealth Management client assets (in billions) (current period is preliminary) (b)
$
254

$
246

 
$
239

3
 %
6
 %
 

 
 
 
 
 
Changes in AUM (in billions) (current period is preliminary) : (c)

 
 
 
 
 
Beginning balance of AUM
$
1,868

$
1,893

 
$
1,727

 
 
Net (outflows) inflows:

 
 
 
 
 
Long-term strategies:


 
 
 
 
 
Equity
(3
)
—

 
(2
)
 
 
Fixed income
(4
)
7

 
2

 
 
Liability-driven investments, including currency overlay
2

13

 
15

 
 
Multi-asset and alternative investments
(3
)
(3
)
 
1

 
 
Total long-term active strategies (outflows) inflows
(8
)
17

 
16

 
 
Index
(7
)
(13
)
 
(13
)
 
 
Total long-term strategies (outflows) inflows
(15
)
4

 
3

 
 
Short term strategies:
 
 
 
 
 
 
Cash
(11
)
(14
)
 
11

 
 
Total net (outflows) inflows
(26
)
(10
)
 
14

 
 
Net market impact
17

(14
)
 
1

 
 
Net currency impact
(53
)
29

 
29

 
 
Divestiture/Other
(1
)
(30
)
(d)
—

 
 
Ending balance of AUM
$
1,805

$
1,868

 
$
1,771

(3
)%
2
 %
(a)
Net of distribution and servicing expense. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 11 for the reconciliation of this Non-GAAP measure. In 1Q18, the adjusted pre-tax margin – Non-GAAP for prior periods was restated to include amortization of intangible assets and the provision for credit losses.
(b)
Includes AUM and AUC/A in the Wealth Management business.
(c)
Excludes securities lending cash management assets and assets managed in the Investment Services business.
(d)
Primarily reflects a change in methodology beginning in 1Q18 to exclude AUM related to equity method investments as well as the CenterSquare divestiture.


KEY DRIVERS

•
Total revenue increased year-over-year and decreased sequentially.
•
Asset Management - The year-over-year increase reflects higher equity market values and the favorable impact of a weaker U.S. dollar (principally versus the British pound), partially offset by the divestiture of CenterSquare and the impact of net outflows. The sequential decrease primarily reflects lower performance fees and the gain on the divestiture of CenterSquare recorded in 1Q18.
•
Wealth Management - The year-over-year increase primarily reflects higher equity market values, partially offset by lower net interest revenue.


Page - 4
BNY Mellon 2Q18 Earnings Release

OTHER SEGMENT primarily includes leasing operations, certain corporate treasury activities, derivatives, business exits and other corporate revenue and expense items.

 
 
 
 
(in millions)
2Q18

1Q18

2Q17

Fee revenue
$
40

$
57

$
113

Net securities gains (losses)
1

(49
)
—

Total fee and other revenue
41

8

113

Net interest (expense)
(35
)
(1
)
(22
)
Total revenue
6

7

91

Provision for credit losses
(6
)
—

(4
)
Noninterest expense
81

87

28

(Loss) income before taxes
$
(69
)
$
(80
)
$
67



KEY DRIVERS

•
Fee revenue decreased year-over-year primarily reflecting the lease-related gains recorded in 2Q17 and lower income from corporate/bank-owned life insurance. The sequential decrease primarily reflects lower asset-related gains.

•
Net interest expense increased year-over-year and sequentially primarily resulting from corporate treasury activity.

•
Both comparisons of noninterest expense were impacted by investments in technology and expenses associated with the continued consolidation of our real estate.


Page - 5
BNY Mellon 2Q18 Earnings Release

CAPITAL AND LIQUIDITY

Our consolidated capital and liquidity ratios are shown in the following table.

Capital and liquidity ratios
June 30, 2018

March 31, 2018

Dec. 31, 2017

Consolidated regulatory capital ratios: (a)(b)
 
 
 
CET1 ratio
11.0
%
10.7
%
10.3
%
Tier 1 capital ratio
13.1
%
12.7
%
12.3
%
Total capital ratio
13.9
%
13.4
%
13.0
%
Tier 1 leverage ratio
6.7
%
6.5
%
6.4
%
SLR
6.2
%
5.9
%
5.9
%
BNY Mellon shareholders’ equity to total assets ratio
11.8
%
11.2
%
11.1
%
BNY Mellon common shareholders’ equity to total assets ratio
10.8
%
10.2
%
10.1
%
 
 
 
 
Average LCR
118
%
116
%
118
%

 
 
 
Book value per common share (c)
$
37.97

$
37.78

$
37.21

Tangible book value per common share – Non-GAAP (c)
$
19.00

$
18.78

$
18.24

Cash dividends per common share
$
0.24

$
0.24

$
0.24

Common dividend payout ratio
23
%
22
%
22
%
Closing stock price per common share
$
53.93

$
51.53

$
53.86

Market capitalization (in millions)
$
53,927

$
52,080

$
54,584

Common shares outstanding (in thousands)
999,945

1,010,676

1,013,442

(a)
Regulatory capital ratios for June 30, 2018 are preliminary. For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under the U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced Approaches, which for the periods noted above was the Advanced Approaches.
(b)
Regulatory capital ratios for Dec. 31, 2017 are presented on a fully phased-in basis. On a transitional basis at Dec. 31, 2017, the CET1 ratio was 10.7%, the Tier 1 capital ratio was 12.7%, the Total capital ratio was 13.4%, the Tier 1 leverage ratio was 6.6% and the SLR was 6.1%.
(c)
Tangible book value per common share – Non-GAAP excludes goodwill and intangible assets, net of deferred tax liabilities. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 11 for the reconciliation of this Non-GAAP measure.


KEY POINTS

•
CET1 capital totaled $18.4 billion at June 30, 2018 , an increase of $52 million compared with March 31, 2018 . The increase primarily reflects capital generated through earnings, partially offset by capital deployed through common stock repurchased and payments of dividends, as well as foreign currency translation adjustments.


Page - 6
BNY Mellon 2Q18 Earnings Release

NET INTEREST REVENUE

Net interest revenue
 
 
 
2Q18 vs.
(dollars in millions ; not meaningful - N/M )
2Q18

1Q18

2Q17

1Q18

2Q17

Net interest revenue
$
916

$
919

$
826

—

11
 %
Add: Tax equivalent adjustment
5

6

12

N/M
N/M
Net interest revenue, on a fully taxable equivalent (“FTE”)
basis – Non-GAAP (a)
$
921

$
925

$
838

—

10
 %
 
 
 
 
 
 
Net interest margin
1.26
%
1.22
%
1.14
%
4
 bps
12
 bps
Net interest margin (FTE) – Non-GAAP (a)
1.26
%
1.23
%
1.16
%
3
 bps
10
 bps
 
 
 
 
 
 
Selected average balances:
 
 
 
 
 
Cash/interbank investments
$
113,475

$
120,821

$
111,021

(6
)%
2
 %
Trading account securities
3,784

4,183

2,455

(10
)
54

Securities
117,761

118,459

117,227

(1
)
—

Loans
57,066

58,606

58,793

(3
)
(3
)
Interest-earning assets
292,086

302,069

289,496

(3
)
1

Interest-bearing deposits
152,799

155,704

142,336

(2
)
7

Federal funds purchased and securities sold under repurchase agreements
18,146

18,963

17,970

(4
)
1

Long-term debt
28,349

28,407

27,398

—

3

Other interest-bearing liabilities
23,815

23,920

25,233

—

(6
)
Interest-bearing liabilities
223,109

226,994

212,937

(2
)
5

Noninterest-bearing deposits
64,768

71,005

73,886

(9
)
(12
)
 
 
 
 
 
 
Selected average yields/rates: (b)
 
 
 
 
 
Cash/interbank investments
1.48
%
1.13
%
0.67
%
 
 
Trading account securities
3.10

2.62

2.85

 
 
Securities
2.16

2.03

1.72

 
 
Loans
3.32

2.90

2.44

 
 
Interest-earning assets
2.14

1.85

1.47

 
 
 
 
 
 
 
 
Interest-bearing deposits
0.45

0.30

0.09

 
 
Federal funds purchased and securities sold under repurchase agreements
3.48

2.29

0.84

 
 
Long-term debt
3.06

2.49

1.87

 
 
Other interest-bearing liabilities
1.47

1.04

0.41

 
 
Interest-bearing liabilities
1.14

0.82

0.42

 
 
 
 
 
 
 
 
Average cash/interbank investments as a percentage of average interest-earning assets
39
%
40
%
38
%
 
 
Average noninterest-bearing deposits as a percentage of average interest-earning assets
22
%
24
%
26
%
 
 
(a)
Net interest revenue (FTE) – Non-GAAP and net interest margin (FTE) – Non-GAAP include the tax equivalent adjustments on tax-exempt income which allows for comparisons of amounts arising from both taxable and tax-exempt sources and is consistent with industry practice. The adjustment to an FTE basis has no impact on net income.
(b)
Yields/rates include the impact of interest rate hedging activities.
bps – basis points.


KEY DRIVERS

•
Net interest revenue increased year-over-year, primarily reflecting higher interest rates. The sequential decrease was primarily driven by lower deposits, partially offset by higher interest rates.


Page - 7
BNY Mellon 2Q18 Earnings Release

NONINTEREST EXPENSE

Noninterest expense
 
 
 
2Q18 vs.
(dollars in millions)
2Q18

1Q18

2Q17

1Q18

2Q17

Staff
$
1,489

$
1,576

$
1,432

(6
)%
4
 %
Professional, legal and other purchased services
328

291

319

13

3

Software and equipment
266

234

232

14

15

Net occupancy
156

139

140

12

11

Sub-custodian and clearing
110

119

108

(8
)
2

Distribution and servicing
106

106

104

—

2

Business development
62

51

63

22

(2
)
Bank assessment charges
47

52

59

(10
)
(20
)
Amortization of intangible assets
48

49

53

(2
)
(9
)
Other
135

122

145

11

(7
)
Total noninterest expense
$
2,747

$
2,739

$
2,655

—
 %
3
 %


KEY DRIVERS

•
The year-over-year increase in total noninterest expense primarily reflects investments in technology, which impacted staff, professional, legal and other purchased services and software and equipment expenses. The-year-over-year increase also reflects the unfavorable impact of a weaker U.S. dollar and expenses associated with the continued consolidation of our real estate.

•
The sequential increase in total noninterest expense primarily reflects investments in technology and expenses associated with the continued consolidation of our real estate. These expenses were partially offset by lower staff expense, primarily driven by the impact of vesting of long-term stock awards for retirement eligible employees recorded in 1Q18, and the favorable impact of a stronger U.S. dollar.

•
The total cost of relocating our corporate headquarters is estimated to be $75 million, of which $12 million was recorded in 2Q18. We expect to record the remaining expense in 4Q18.


Page - 8
BNY Mellon 2Q18 Earnings Release

THE BANK OF NEW YORK MELLON CORPORATION
Condensed Consolidated Income Statement

 
(in millions)
Quarter ended
 
Year-to-date
 
June 30, 2018

March 31, 2018

June 30, 2017

 
June 30, 2018

June 30, 2017

 
 
Fee and other revenue
 
 
 
 
 
 
 
Investment services fees:
 
 
 
 
 
 
 
Asset servicing
$
1,157

$
1,168

$
1,085

 
$
2,325

$
2,148

 
Clearing services
392

414

394

 
806

770

 
Issuer services
266

260

241

 
526

492

 
Treasury services
140

138

140

 
278

279

 
Total investment services fees
1,955

1,980

1,860


3,935

3,689

 
Investment management and performance fees
910

960

879

 
1,870

1,721

 
Foreign exchange and other trading revenue
187

209

165

 
396

329

 
Financing-related fees
53

52

53

 
105

108

 
Distribution and servicing
34

36

41

 
70

82

 
Investment and other income
70

82

122

 
152

199

 
Total fee revenue
3,209

3,319

3,120


6,528

6,128

 
Net securities gains (losses)
1

(49
)
—

 
(48
)
10

 
Total fee and other revenue
3,210

3,270

3,120


6,480

6,138

 
Operations of consolidated investment management funds
 
 
 
 
 
 
 
Investment income (loss)
13

(11
)
10

 
2

47

 
Interest of investment management fund note holders
1

—

—

 
1

4

 
Income (loss) from consolidated investment management funds
12

(11
)
10


1

43

 
Net interest revenue
 
 
 
 
 
 
 
Interest revenue
1,553

1,381

1,052

 
2,934

2,012

 
Interest expense
637

462

226

 
1,099

394

 
Net interest revenue
916

919

826


1,835

1,618

 
Total revenue
4,138

4,178

3,956


8,316

7,799

 
Provision for credit losses
(3
)
(5
)
(7
)
 
(8
)
(12
)
 
Noninterest expense
 
 
 
 
 
 
 
Staff (a)
1,489

1,576

1,432

 
3,065

2,920

 
Professional, legal and other purchased services
328

291

319

 
619

632

 
Software and equipment
266

234

232

 
500

455

 
Net occupancy
156

139

140

 
295

276

 
Sub-custodian and clearing (b)
110

119

108

 
229

211

 
Distribution and servicing
106

106

104

 
212

204

 
Business development
62

51

63

 
113

114

 
Bank assessment charges
47

52

59

 
99

116

 
Amortization of intangible assets
48

49

53

 
97

105

 
Other (a)(b)(c)
135

122

145

 
257

264

 
Total noninterest expense
2,747

2,739

2,655


5,486

5,297

 
Income
 
 
 
 
 
 
 
Income before income taxes
1,394

1,444

1,308


2,838

2,514

 
Provision for income taxes
286

282

332

 
568

601

 
Net income
1,108

1,162

976


2,270

1,913

 
Net (income) loss attributable to noncontrolling interests (includes $(7), $11, $(3), $4 and $(21) related to consolidated investment management funds, respectively)
(5
)
9

(1
)
 
4

(16
)
 
Net income applicable to shareholders of The Bank of New York Mellon Corporation
1,103

1,171

975


2,274

1,897

 
Preferred stock dividends
(48
)
(36
)
(49
)
 
(84
)
(91
)
 
Net income applicable to common shareholders of The Bank of New York Mellon Corporation
$
1,055

$
1,135

$
926


$
2,190

$
1,806

(a)
In 1Q18, we adopted new accounting guidance included in ASU 2017-07, Compensation-Retirement Benefits - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which required the reclassification of the components of pension and other post-retirement costs, other than the service cost component. As a result, staff expense increased and other expense decreased. Prior periods have been reclassified.
(b)
Beginning in 1Q18, clearing expense, which was previously included in other expense, was included with sub-custodian expense. Prior periods have been reclassified.
(c)
Beginning in 1Q18, M&I, litigation and restructuring charges are no longer separately disclosed. Expenses previously reported in this line have been reclassified to existing expense categories, primarily other expense.

Page - 9
BNY Mellon 2Q18 Earnings Release

THE BANK OF NEW YORK MELLON CORPORATION
Condensed Consolidated Income Statement - continued

Net income applicable to common shareholders of The Bank of New York Mellon Corporation used for the earnings per share calculation
Quarter ended
 
Year-to-date
June 30, 2018

March 31, 2018

June 30, 2017

 
June 30, 2018

June 30, 2017

(in millions)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation
$
1,055

$
1,135

$
926

 
$
2,190

$
1,806

Less: Earnings allocated to participating securities
7

8

13

 
15

27

Net income applicable to the common shareholders of The Bank of New York Mellon Corporation after required adjustments for the calculation of basic and diluted earnings per common share
$
1,048

$
1,127

$
913

 
$
2,175

$
1,779



Average common shares and equivalents outstanding of The Bank of New York Mellon Corporation
Quarter ended
 
Year-to-date
June 30, 2018

March 31, 2018

June 30, 2017

 
June 30, 2018

June 30, 2017

(in thousands)
Basic
1,010,179

1,016,797

1,035,829

 
1,013,507

1,038,479

Diluted
1,014,357

1,021,731

1,041,879

 
1,018,020

1,044,809



Earnings per share applicable to the common shareholders of The Bank of New York Mellon Corporation
Quarter ended
 
Year-to-date
June 30, 2018

March 31, 2018

June 30, 2017

 
June 30, 2018

June 30, 2017

(in dollars)
Basic
$
1.04

$
1.11

$
0.88

 
$
2.15

$
1.71

Diluted
$
1.03

$
1.10

$
0.88

 
$
2.14

$
1.70




Page - 10
BNY Mellon 2Q18 Earnings Release

SUPPLEMENTAL INFORMATION – EXPLANATION OF GAAP AND NON-GAAP FINANCIAL MEASURES

BNY Mellon has included in this Earnings Release certain Non-GAAP financial measures on a tangible basis, as a supplement to GAAP information. Tangible common shareholders’ equity excludes goodwill and intangible assets, net of deferred tax liabilities. BNY Mellon believes that the return on tangible common equity measure is an additional useful measure for investors because it presents a measure of those assets that can generate income. BNY Mellon has provided a measure of tangible book value per common share, which it believes provides additional useful information as to the level of tangible assets in relation to shares of common stock outstanding.

BNY Mellon has presented the operating margin for the Investment Management business net of distribution and servicing expense that was passed to third parties who distribute or service our managed funds. BNY Mellon believes that this measure is useful when evaluating the performance of the Investment Management business relative to industry competitors.

The following table presents the reconciliation of the return on common equity and tangible common equity.

Return on common equity and tangible common equity reconciliation
 
 
 
(dollars in millions)
2Q18

1Q18

2Q17

Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP
$
1,055

$
1,135

$
926

Add: Amortization of intangible assets
48

49

53

Less: Tax impact of amortization of intangible assets
11

12

19

Adjusted net income applicable to common shareholders of The Bank of New York Mellon Corporation, excluding amortization of intangible assets – Non-GAAP
$
1,092

$
1,172

$
960

 
 
 
 
Average common shareholders’ equity
$
37,750

$
37,593

$
35,862

Less: Average goodwill
17,505

17,581

17,408

Average intangible assets
3,341

3,397

3,532

Add: Deferred tax liability – tax deductible goodwill (a)
1,054

1,042

1,542

Deferred tax liability – intangible assets (a)
709

716

1,095

Average tangible common shareholders’ equity – Non-GAAP
$
18,667

$
18,373

$
17,559

 
 
 
 
Return on common equity (annualized)  – GAAP
11.2
%
12.2
%
10.4
%
Return on tangible common equity (annualized) – Non-GAAP
23.5
%
25.9
%
21.9
%
(a)
Deferred tax liabilities for 2Q17 are based on fully phased-in U.S. capital rules.


The following table presents the reconciliation of the book value and tangible book value per common share.

Book value and tangible book value per common share reconciliation
June 30, 2018

March 31, 2018

Dec. 31, 2017

(dollars in millions except common shares)
BNY Mellon shareholders’ equity at period end – GAAP
$
41,505

$
41,728

$
41,251

Less: Preferred stock
3,542

3,542

3,542

BNY Mellon common shareholders’ equity at period end – GAAP
37,963

38,186

37,709

Less: Goodwill
17,418

17,596

17,564

Intangible assets
3,308

3,370

3,411

Add: Deferred tax liability – tax deductible goodwill (a)
1,054

1,042

1,034

Deferred tax liability – intangible assets (a)
709

716

718

BNY Mellon tangible common shareholders’ equity at period end – Non-GAAP
$
19,000

$
18,978

$
18,486

 
 
 


Period-end common shares outstanding (in thousands)
999,945

1,010,676

1,013,442

 
 
 


Book value per common share – GAAP
$
37.97

$
37.78

$
37.21

Tangible book value per common share – Non-GAAP
$
19.00

$
18.78

$
18.24

(a)
Deferred tax liabilities for 2Q17 are based on fully phased-in U.S. capital rules.


Page - 11
BNY Mellon 2Q18 Earnings Release

The following table presents the reconciliation of the pre-tax operating margin for the Investment Management business.

Pre-tax operating margin reconciliation - Investment Management business
 
 
 
(dollars in millions)
2Q18

1Q18

2Q17

Income before income taxes – GAAP
$
319

$
381

$
288

 
 
 
 
Total revenue – GAAP
$
1,018

$
1,088

$
986

Less: Distribution and servicing expense
103

110

104

Adjusted total revenue, net of distribution and servicing expense – Non-GAAP
$
915

$
978

$
882

 
 
 
 
Pre-tax operating margin – GAAP (a)
31
%
35
%
29
%
Adjusted pre-tax operating margin, net of distribution and servicing expense – Non-GAAP  (a)
35
%
39
%
33
%
(a)    Income before taxes divided by total revenue.


CAUTIONARY STATEMENT

A number of statements (i) in this Earnings Release, (ii) in our presentations and (iii) in the responses to questions on our conference call discussing our quarterly results and other public events may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 including our capital plans, strategic priorities, financial goals, driving organic growth, expenses associated with the consolidation of our real estate and the timing of such expenses, business opportunities, preliminary business metrics and regulatory capital ratios and statements regarding our aspirations, as well as our overall plans, strategies, goals, objectives, expectations, outlooks, estimates, intentions, targets, opportunities, focus and initiatives. These statements may be expressed in a variety of ways, including the use of future or present tense language. Words such as “estimate,” “forecast,” “project,” “anticipate,” “likely,” “target,” “expect,” “intend,” “continue,” “seek,” “believe,” “plan,” “goal,” “could,” “should,” “would,” “may,” “might,” “will,” “strategy,” “synergies,” “opportunities,” “trends,” “future” and words of similar meaning signify forward-looking statements. These statements and other forward-looking statements contained in other public disclosures of The Bank of New York Mellon Corporation which make reference to the cautionary factors described in this Earnings Release are based upon current beliefs and expectations and are subject to significant risks and uncertainties (some of which are beyond BNY Mellon’s control). Actual results may differ materially from those expressed or implied as a result of these risks and uncertainties, including, but not limited to, the risk factors and other uncertainties set forth in BNY Mellon’s Annual Report on Form 10-K for the year ended Dec. 31, 2017 and BNY Mellon’s other filings with the Securities and Exchange Commission. All forward-looking statements in this Earnings Release speak only as of July 19, 2018 , and BNY Mellon undertakes no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.


ABOUT BNY MELLON

BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries. As of June 30, 2018 , BNY Mellon had $33.6 trillion in assets under custody and/or administration, and $1.8 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com. Follow us on Twitter @BNYMellon or visit our newsroom at www.bnymellon.com/newsroom for the latest company news.



Page - 12
BNY Mellon 2Q18 Earnings Release

CONFERENCE CALL INFORMATION

Charles W. Scharf, Chairman and Chief Executive Officer, and Michael P. Santomassimo, Chief Financial Officer, will host a conference call and simultaneous live audio webcast at 8:00 a.m. EDT on July 19, 2018 . This conference call and audio webcast will include forward-looking statements and may include other material information.

Investors and analysts wishing to access the conference call and audio webcast may do so by dialing (800) 390-5696 (U.S.) or (720) 452-9082 (International), and using the passcode: 678511, or by logging onto www.bnymellon.com/investorrelations. Earnings materials will be available at www.bnymellon.com/investorrelations beginning at approximately 6:30 a.m. EDT on July 19, 2018 . Replays of the conference call and audio webcast will be available beginning July 19, 2018 at approximately 2 p.m. EDT through Aug. 19, 2018 by dialing (888) 203-1112 (U.S.) or (719) 457-0820 (International), and using the passcode: 4968536. The archived version of the conference call and audio webcast will also be available at www.bnymellon.com/investorrelations for the same time period.


Page - 13

BNYLOGOA01A54.JPG     
The Bank of New York Mellon Corporation
 
Financial Supplement
 
Second Quarter 2018
 
 



Table of Contents
BNYLOGO01A04.JPG
 
 
 
 
 
 
 
 
Consolidated Results
 
Page
Consolidated Financial Highlights
 
Condensed Consolidated Income Statement
 
Condensed Consolidated Balance Sheet
 
Fee and Other Revenue
 
Average Balances and Interest Rates
 
Noninterest Expense
 
Capital and Liquidity
 
 
 
 
Key Market Metrics
 
 
 
 
Business Segment Results
 
 
Investment Services Business
 
Investment Management Business
 
AUM by Product, AUM Flows and Wealth Management Client Assets
 
Other Segment
 
 
 
 
Other
 
 
Investment Securities Portfolio
 
Allowance for Credit Losses and Nonperforming Assets
 
 
 
 
Supplemental Information - Explanation of GAAP and Non-GAAP Financial Measures
 




THE BANK OF NEW YORK MELLON CORPORATION
BNYLOGO01A04.JPG
 
CONSOLIDATED FINANCIAL HIGHLIGHTS
 
 
 
 
(dollars in millions, except per common share amounts, or unless otherwise noted)
 
 
 
 
 
 
 
2Q18 vs.
 
 
 
 
YTD18 vs.
2Q18

1Q18

 
4Q17

3Q17

2Q17

 
1Q18
2Q17
 
YTD18
YTD17
 
YTD17
Selected income statement data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee revenue
$
3,209

$
3,319

 
$
2,886

$
3,148

$
3,120

 
(3
)%
3
 %
 
$
6,528

$
6,128

 
7
 %
Net securities gains (losses)
1

(49
)
 
(26
)
19

—

 
N/M

N/M

 
(48
)
10

 
N/M

Fee and other revenue
3,210

3,270

 
2,860

3,167

3,120

 
(2
)
3

 
6,480

6,138

 
6

Income (loss) from consolidated investment management funds
12

(11
)
 
17

10

10

 
N/M

N/M

 
1

43

 
N/M

Net interest revenue
916

919

 
851

839

826

 
—

11

 
1,835

1,618

 
13

Total revenue
4,138

4,178

 
3,728

4,016

3,956

 
(1
)
5

 
8,316

7,799

 
7

Provision for credit losses
(3
)
(5
)
 
(6
)
(6
)
(7
)
 
N/M

N/M

 
(8
)
(12
)
 
N/M

Noninterest expense
2,747

2,739

 
3,006

2,654

2,655

 
—

3

 
5,486

5,297

 
4

Income before income taxes
1,394

1,444

 
728

1,368

1,308

 
(3
)
7

 
2,838

2,514

 
13

Provision (benefit) for income taxes
286

282

 
(453
)
348

332

 
1

(14
)
 
568

601

 
(5
)
Net income
$
1,108

$
1,162

 
$
1,181

$
1,020

$
976

 
(5
)%
14
 %
 
$
2,270

$
1,913

 
19
 %
Net income applicable to common shareholders of The Bank of New York Mellon Corporation
$
1,055

$
1,135

 
$
1,126

$
983

$
926

 
(7
)%
14
 %
 
$
2,190

$
1,806

 
21
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per common share
$
1.03

$
1.10

 
$
1.08

$
0.94

$
0.88

 
(6
)%
17
 %
 
$
2.14

$
1.70

 
26
 %
Average common shares and equivalents outstanding - diluted (in thousands)
1,014,357

1,021,731

 
1,030,404

1,041,138

1,041,879

 
(1
)%
(3
)%
 
1,018,020

1,044,809

 
(3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial ratios
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax operating margin
34
%
35
%
 
20
%
34
%
33
%
 
 
 
 
34
%
32
%
 
 
Return on common equity (annualized) (a)
11.2
%
12.2
%
 
12.1
%
10.6
%
10.4
%
 
 
 
 
11.7
%
10.3
%
 
 
Return on tangible common equity (annualized)  – Non-GAAP (a)
23.5
%
25.9
%
 
25.9
%
21.9
%
21.9
%
 
 
 
 
24.6
%
22.1
%
 
 
Percent of non-U.S. total revenue
37
%
37
%
 
39
%
36
%
35
%
 
 
 
 
37
%
34
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Period end
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets under custody and/or administration (“AUC/A”) (in trillions) (b)
$
33.6

$
33.5

 
$
33.3

$
32.2

$
31.1

 
—
 %
8
 %
 
 
 
 
 
Assets under management (“AUM”) (in trillions)
$
1.81

$
1.87

 
$
1.89

$
1.82

$
1.77

 
(3
)%
2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Book value per common share (a)
$
37.97

$
37.78

 
$
37.21

$
36.11

$
35.26

 
 
 
 
 
 
 
 
Tangible book value per common share – Non-GAAP (a)
$
19.00

$
18.78

 
$
18.24

$
18.19

$
17.53

 
 
 
 
 
 
 
 
Cash dividends per common share
$
0.24

$
0.24

 
$
0.24

$
0.24

$
0.19

 
 
 
 
 
 
 
 
Common dividend payout ratio
23
%
22
%
 
22
%
26
%
22
%
 
 
 
 
 
 
 
 
Closing stock price per common share
$
53.93

$
51.53

 
$
53.86

$
53.02

$
51.02

 
 
 
 
 
 
 
 
Market capitalization
$
53,927

$
52,080

 
$
54,584

$
54,294

$
52,712

 
 
 
 
 
 
 
 
Common shares outstanding (in thousands)
999,945

1,010,676

 
1,013,442

1,024,022

1,033,156

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital ratios at period end   (c)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common equity Tier 1 (“CET1”) ratio
11.0
%
10.7
%
 
10.3
%
10.7
%
10.4
%
 
 
 
 
 
 
 
 
Tier 1 capital ratio
13.1
%
12.7
%
 
12.3
%
12.8
%
12.5
%
 
 
 
 
 
 
 
 
Total capital ratio
13.9
%
13.4
%
 
13.0
%
13.6
%
12.8
%
 
 
 
 
 
 
 
 
Supplementary leverage ratio (“SLR”)
6.2
%
5.9
%
 
5.9
%
6.1
%
6.0
%
 
 
 
 
 
 
 
 
(a)    Non-GAAP information, for all periods presented, excludes goodwill and intangible assets, net of deferred tax liabilities. See "Supplemental Information - Explanation of GAAP and Non-GAAP Financial Measures" beginning on page 18 for the reconciliation of Non-GAAP measures.
(b)    Includes the AUC/A of CIBC Mellon Global Securities Services Company ("CIBC Mellon"), a joint venture with the Canadian Imperial Bank of Commerce, of $1.4 trillion at June 30, 2018, $1.3 trillion at March 31, 2018, Dec. 31, 2017 and Sept. 30, 2017 and $1.2 trillion at June 30, 2017.
(c)    Regulatory capital ratios for June 30, 2018 are preliminary. All risk-based capital ratios are presented using Advanced Approaches risk-weightings. The capital ratios for the 2017 periods are presented on a fully phased-in basis. See "Capital and Liquidity" for the transitional capital ratios.
N/M - Not meaningful.

3



THE BANK OF NEW YORK MELLON CORPORATION
 
 
 
 
BNYLOGO01A04.JPG
 
CONDENSED CONSOLIDATED INCOME STATEMENT
 
 
 
 
(dollars in millions, except per share amounts; common shares in thousands)
 
 
 
 
 
 
 
2Q18 vs.
 
 
 
 
YTD18 vs.
2Q18

1Q18

 
4Q17

3Q17

2Q17

 
1Q18
2Q17
 
YTD18

YTD17

 
YTD17
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment services fees:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset servicing
$
1,157

$
1,168

 
$
1,130

$
1,105

$
1,085

 
(1
)%
7
 %
 
$
2,325

$
2,148

 
8
 %
Clearing services
392

414

 
400

383

394

 
(5
)
(1
)
 
806

770

 
5

Issuer services
266

260

 
197

288

241

 
2

10

 
526

492

 
7

Treasury services
140

138

 
137

141

140

 
1

—

 
278

279

 
—

Total investment services fees
1,955

1,980

 
1,864

1,917

1,860

 
(1
)
5

 
3,935

3,689

 
7

Investment management and performance fees
910

960

 
962

901

879

 
(5
)
4

 
1,870

1,721

 
9

Foreign exchange and other trading revenue
187

209

 
166

173

165

 
(11
)
13

 
396

329

 
20

Financing-related fees
53

52

 
54

54

53

 
2

—

 
105

108

 
(3
)
Distribution and servicing
34

36

 
38

40

41

 
(6
)
(17
)
 
70

82

 
(15
)
Investment and other income (loss)
70

82

 
(198
)
63

122

 
N/M

N/M

 
152

199

 
N/M

Total fee revenue
3,209

3,319

 
2,886

3,148

3,120

 
(3
)
3

 
6,528

6,128

 
7

Net securities gains (losses)
1

(49
)
 
(26
)
19

—

 
N/M

N/M

 
(48
)
10

 
N/M

Total fee and other revenue
3,210

3,270

 
2,860

3,167

3,120

 
(2
)
3

 
6,480

6,138

 
6

Income (loss) from consolidated investment management funds
12

(11
)
 
17

10

10

 
N/M

N/M

 
1

43

 
N/M

Net interest revenue
916

919

 
851

839

826

 
—

11

 
1,835

1,618

 
13

Total revenue
4,138

4,178

 
3,728

4,016

3,956

 
(1
)
5

 
8,316

7,799

 
7

Provision for credit losses
(3
)
(5
)
 
(6
)
(6
)
(7
)
 
N/M

N/M

 
(8
)
(12
)
 
N/M

Noninterest expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Staff (a)
1,489

1,576

 
1,628

1,485

1,432

 
(6
)
4

 
3,065

2,920

 
5

Professional, legal and other purchased services
328

291

 
339

305

319

 
13

3

 
619

632

 
(2
)
Software and equipment
266

234

 
297

233

232

 
14

15

 
500

455

 
10

Net occupancy
156

139

 
153

141

140

 
12

11

 
295

276

 
7

Sub-custodian and clearing (b)
110

119

 
102

101

108

 
(8
)
2

 
229

211

 
9

Distribution and servicing
106

106

 
106

109

104

 
—

2

 
212

204

 
4

Business development
62

51

 
66

49

63

 
22

(2
)
 
113

114

 
(1
)
Bank assessment charges
47

52

 
53

51

59

 
(10
)
(20
)
 
99

116

 
(15
)
Amortization of intangible assets
48

49

 
52

52

53

 
(2
)
(9
)
 
97

105

 
(8
)
Other (a)(b)(c)
135

122

 
210

128

145

 
11

(7
)
 
257

264

 
(3
)
Total noninterest expense
2,747

2,739

 
3,006

2,654

2,655

 
—

3

 
5,486

5,297

 
4

Income before income taxes
1,394

1,444

 
728

1,368

1,308

 
(3
)
7

 
2,838

2,514

 
13

Provision (benefit) for income taxes
286

282

 
(453
)
348

332

 
1

(14
)
 
568

601

 
(5
)
Net income
1,108

1,162

 
1,181

1,020

976

 
(5
)
14

 
2,270

1,913

 
19

Net (income) loss attributable to noncontrolling interests
(5
)
9

 
(6
)
(2
)
(1
)
 
N/M

N/M

 
4

(16
)
 
N/M

Preferred stock dividends
(48
)
(36
)
 
(49
)
(35
)
(49
)
 
N/M

N/M

 
(84
)
(91
)
 
(8
)
Net income applicable to common shareholders of The Bank of New York Mellon Corporation
$
1,055

$
1,135

 
$
1,126

$
983

$
926

 
(7
)%
14
 %
 
$
2,190

$
1,806

 
21
 %

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average common shares and equivalents outstanding: Basic
1,010,179

1,016,797

 
1,024,828

1,035,337

1,035,829

 
(1
)%
(2
)%
 
1,013,507

1,038,479

 
(2
)%
Diluted
1,014,357

1,021,731

 
1,030,404

1,041,138

1,041,879

 
(1
)%
(3
)%
 
1,018,020

1,044,809

 
(3
)%

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per common share: Basic
$
1.04

$
1.11

 
$
1.09

$
0.94

$
0.88

 
(6
)%
18
 %
 
$
2.15

$
1.71

 
26
 %
Diluted
$
1.03

$
1.10

 
$
1.08

$
0.94

$
0.88

 
(6
)%
17
 %
 
$
2.14

$
1.70

 
26
 %
(a)    In 1Q18, we adopted new accounting guidance included in ASU 2017-07, Compensation-Retirement Benefits - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which required the reclassification of the components of pension and other post-retirement costs, other than the service cost component. As a result, staff expense increased and other expense decreased. Prior periods have been reclassified.
(b)    Beginning in 1Q18, clearing expense, which was previously included in other expense, was included with sub-custodian expense. Prior periods have been reclassified.
(c)    Beginning in 1Q18, merger and integration ("M&I"), litigation and restructuring charges are no longer separately disclosed. Expenses previously reported in this line have been reclassified to existing expense categories, primarily other expense.
N/M - Not meaningful.

4



THE BANK OF NEW YORK MELLON CORPORATION
 
 
 
BNYLOGO01A04.JPG
 
CONDENSED CONSOLIDATED BALANCE SHEET
 
 
 
 
2018
 
2017
(in millions)
June 30

March 31

 
Dec. 31

Sept. 30

June 30

Assets
 
 
 
 
 
 
Cash and due from:
 
 
 
 
 
 
Banks
$
5,361

$
4,636

 
$
5,382

$
5,557

$
4,725

Interest-bearing deposits with the Federal Reserve and other central banks
75,116

91,431

 
91,510

75,808

74,130

Interest-bearing deposits with banks
16,134

15,186

 
11,979

15,256

13,601

Federal funds sold and securities purchased under resale agreements
26,494

28,784

 
28,135

27,883

27,440

Securities
119,081

118,789

 
120,370

120,049

119,260

Trading assets
7,035

8,596

 
6,022

4,666

5,279

Loans
57,776

60,809

 
61,540

59,068

61,673

Allowance for loan losses
(145
)
(156
)
 
(159
)
(161
)
(165
)
Net loans
57,631

60,653

 
61,381

58,907

61,508

Premises and equipment
1,752

1,702

 
1,634

1,631

1,640

Accrued interest receivable
663

610

 
610

547

567

Goodwill
17,418

17,596

 
17,564

17,543

17,457

Intangible assets
3,308

3,370

 
3,411

3,461

3,506

Other assets  
22,507

21,638

 
23,029

22,287

25,000

Subtotal assets of operations  
352,500

372,991

 
371,027

353,595

354,113

Assets of consolidated investment management funds, at fair value
428

606

 
731

802

702

Total assets  
$
352,928

$
373,597

 
$
371,758

$
354,397

$
354,815

Liabilities
 
 
 
 
 
 
Deposits
$
230,560

$
241,844

 
$
244,322

$
230,996

$
235,677

Federal funds purchased and securities sold under repurchase agreements
13,200

21,600

 
15,163

10,314

10,934

Trading liabilities
3,580

3,365

 
3,984

3,253

4,100

Payables to customers and broker-dealers
19,123

20,172

 
20,184

21,176

21,622

Commercial paper
2,508

3,936

 
3,075

2,501

876

Other borrowed funds
3,053

1,550

 
3,028

3,353

1,338

Accrued taxes and other expenses
5,452

5,349

 
6,225

6,070

5,670

Other liabilities
5,443

5,707

 
6,050

7,195

6,379

Long-term debt
28,260

27,939

 
27,979

28,408

27,699

Subtotal liabilities of operations
311,179

331,462

 
330,010

313,266

314,295

Liabilities of consolidated investment management funds, at fair value
3

11

 
2

27

22

Total liabilities  
311,182

331,473

 
330,012

313,293

314,317

Temporary equity
 
 
 
 
 
 
Redeemable noncontrolling interests
189

184

 
179

197

181

Permanent equity
 
 
 
 
 
 
Preferred stock
3,542

3,542

 
3,542

3,542

3,542

Common stock
14

14

 
14

14

13

Additional paid-in capital
26,981

26,911

 
26,665

26,588

26,432

Retained earnings
27,306

26,496

 
25,635

24,757

24,027

Accumulated other comprehensive loss, net of tax
(2,795
)
(2,343
)
 
(2,357
)
(2,781
)
(3,093
)
Less: Treasury stock, at cost
(13,543
)
(12,892
)
 
(12,248
)
(11,597
)
(10,947
)
Total The Bank of New York Mellon Corporation shareholders’ equity
41,505

41,728

 
41,251

40,523

39,974

Nonredeemable noncontrolling interests of consolidated investment management funds  
52

212

 
316

384

343

Total permanent equity  
41,557

41,940

 
41,567

40,907

40,317

Total liabilities, temporary equity and permanent equity  
$
352,928

$
373,597

 
$
371,758

$
354,397

$
354,815


5



THE BANK OF NEW YORK MELLON CORPORATION
 
 
 
 
BNYLOGO01A04.JPG
 
FEE AND OTHER REVENUE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2Q18 vs.
 
 
 
 
YTD18 vs.

(dollars in millions)
2Q18

1Q18

 
4Q17

3Q17

2Q17

 
1Q18
2Q17
 
YTD18

YTD17

 
YTD17

Investment services fees:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset servicing
$
1,097

$
1,113

 
$
1,079

$
1,058

$
1,037

 
(1
)%
6
 %
 
$
2,210

$
2,051

 
8
 %
Securities lending
60

55

 
51

47

48

 
9

25

 
115

97

 
19

Clearing services
392

414

 
400

383

394

 
(5
)
(1
)
 
806

770

 
5

Issuer services
266

260

 
197

288

241

 
2

10

 
526

492

 
7

Treasury services
140

138

 
137

141

140

 
1

—

 
278

279

 
—

Total investment services fees
1,955

1,980

 
1,864

1,917

1,860

 
(1
)
5

 
3,935

3,689

 
7

Investment management and performance fees (a)(b)
910

960

 
962

901

879

 
(5
)
4

 
1,870

1,721

 
9

Foreign exchange and other trading revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange
171

183

 
175

158

151

 
(7
)
13

 
354

305

 
16

Other trading revenue (loss)
16

26

 
(9
)
15

14

 
N/M

N/M

 
42

24

 
N/M

Total foreign exchange and other trading revenue
187

209

 
166

173

165

 
(11
)
13

 
396

329

 
20

Financing-related fees
53

52

 
54

54

53

 
2

—

 
105

108

 
(3
)
Distribution and servicing
34

36

 
38

40

41

 
(6
)
(17
)
 
70

82

 
(15
)
Investment and other income (loss) :
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate/bank-owned life insurance
31

36

 
43

37

43

 
N/M

N/M

 
67

73

 
N/M

Asset-related gains (losses)
15

46

 
—

1

(5
)
 
N/M

N/M

 
61

(2
)
 
N/M

Expense reimbursements from joint venture
19

16

 
15

18

17

 
N/M

N/M

 
35

31

 
N/M

Seed capital gains (a)
3

—

 
7

6

10

 
N/M

N/M

 
3

19

 
N/M

Equity investment income
2

—

 
4

—

7

 
N/M

N/M

 
2

33

 
N/M

Lease-related gains
—

—

 
4

—

51

 
N/M

N/M

 
—

52

 
N/M

Other income (loss)
—

(16
)
 
(271
)
1

(1
)
 
N/M

N/M

 
(16
)
(7
)
 
N/M

Total investment and other income (loss) (a)
70

82

 
(198
)
63

122

 
N/M

N/M

 
152

199

 
N/M

Total fee revenue
3,209

3,319

 
2,886

3,148

3,120

 
(3
)
3

 
6,528

6,128

 
7

Net securities gains (losses)
1

(49
)
 
(26
)
19

—

 
N/M

N/M

 
(48
)
10

 
N/M

Total fee and other revenue
$
3,210

$
3,270

 
$
2,860

$
3,167

$
3,120

 
(2
)%
3
 %
 
$
6,480

$
6,138

 
6
 %
(a)    Excludes seed capital gains related to consolidated investment management funds, which are reflected in operations of consolidated investment management funds.
(b)    On a constant currency basis (Non-GAAP), investment management and performance fees increased 1% compared with 2Q17. See "Supplemental Information - Explanation of GAAP and Non-GAAP Financial Measures" beginning on page 18 for the reconciliation of this Non-GAAP measure.
N/M - Not meaningful.


6



THE BANK OF NEW YORK MELLON CORPORATION
 
 
 
 
 
 
 
 
 
BNYLOGO01A04.JPG
 
AVERAGE BALANCES AND INTEREST RATES
 
 
 
 
 
 
 
 
 
 
2Q18
 
1Q18
 
4Q17
 
3Q17
 
2Q17
 
Average balance

Average rate

 
Average balance

Average rate

 
Average balance

Average rate

 
Average balance

Average rate

 
Average balance

Average rate

(dollars in millions, presented on an FTE basis)
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits with banks (primarily foreign banks)
$
15,748

1.41
%
 
$
13,850

1.25
%
 
$
14,068

1.03
%
 
$
15,899

0.86
%
 
$
14,832

0.73
%
Interest-bearing deposits held at the Federal Reserve and other central banks
69,676

0.77

 
79,068

0.64

 
74,961

0.54

 
70,430

0.50

 
69,316

0.41

Federal funds sold and securities purchased under resale agreements (a)
28,051

3.29

 
27,903

2.47

 
28,417

2.11

 
28,120

1.67

 
26,873

1.29

Margin loans
14,838

3.46

 
15,674

2.98

 
14,018

2.67

 
13,206

2.60

 
15,058

2.32

Non-margin loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic offices
29,970

3.44

 
30,415

3.02

 
30,462

2.73

 
29,950

2.87

 
30,734

2.70

Foreign offices
12,258

2.87

 
12,517

2.51

 
12,292

2.21

 
12,788

2.09

 
13,001

1.99

Total non-margin loans
42,228

3.27

 
42,932

2.87

 
42,754

2.58

 
42,738

2.64

 
43,735

2.49

Securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government obligations
23,199

2.02

 
23,460

1.88

 
25,195

1.71

 
25,349

1.67

 
25,928

1.64

U.S. Government agency obligations
63,022

2.37

 
62,975

2.23

 
62,889

2.07

 
61,710

2.00

 
59,533

1.95

States and political subdivisions - tax-exempt
2,677

2.75

 
2,875

2.62

 
3,010

3.10

 
3,226

3.06

 
3,298

3.09

Other securities
28,863

1.75

 
29,149

1.69

 
29,131

1.34

 
28,804

1.34

 
28,468

1.15

Trading securities
3,784

3.10

 
4,183

2.62

 
2,723

2.02

 
2,359

2.26

 
2,455

2.85

Total securities
121,545

2.19

 
122,642

2.05

 
122,948

1.85

 
121,448

1.81

 
119,682

1.74

Total interest-earning assets
$
292,086

2.14
%
 
$
302,069

1.85
%
 
$
297,166

1.65
%
 
$
291,841

1.59
%
 
$
289,496

1.47
%
Noninterest-earning assets
54,242

 
 
56,106

 
 
53,620

 
 
53,868

 
 
53,019

 
Total assets
$
346,328

 
 
$
358,175

 
 
$
350,786

 
 
$
345,709

 
 
$
342,515

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and total equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic offices
$
54,200

0.78
%
 
$
51,612

0.55
%
 
$
45,280

0.36
%
 
$
44,212

0.28
%
 
$
48,809

0.17
%
Foreign offices
98,599

0.28

 
104,092

0.18

 
102,483

0.09

 
98,278

0.10

 
93,527

0.05

Total interest-bearing deposits
152,799

0.45

 
155,704

0.30

 
147,763

0.17

 
142,490

0.16

 
142,336

0.09

Federal funds purchased and securities sold under repurchase agreements  (a)
18,146

3.48

 
18,963

2.29

 
20,211

1.83

 
21,403

1.30

 
17,970

0.84

Trading liabilities
1,198

2.43

 
1,569

2.26

 
1,406

0.38

 
1,434

0.54

 
1,216

0.61

Other borrowed funds
2,399

2.40

 
2,119

1.67

 
3,421

1.46

 
2,197

1.38

 
1,193

1.24

Commercial paper
3,869

2.13

 
3,131

1.59

 
3,391

1.23

 
2,736

1.15

 
2,215

0.95

Payables to customers and broker-dealers
16,349

1.10

 
17,101

0.75

 
17,868

0.49

 
18,516

0.42

 
20,609

0.30

Long-term debt
28,349

3.06

 
28,407

2.49

 
28,245

2.29

 
28,138

2.07

 
27,398

1.87

Total interest-bearing liabilities
$
223,109

1.14
%
 
$
226,994

0.82
%
 
$
222,305

0.65
%
 
$
216,914

0.57
%
 
$
212,937

0.42
%
Total noninterest-bearing deposits
64,768

 
 
71,005

 
 
69,111

 
 
70,168

 
 
73,886

 
Other noninterest-bearing liabilities
16,857

 
 
18,571

 
 
18,422

 
 
17,763

 
 
15,656

 
Total The Bank of New York Mellon Corporation shareholders’ equity
41,292

 
 
41,135

 
 
40,494

 
 
40,322

 
 
39,404

 
Noncontrolling interests
302

 
 
470

 
 
454

 
 
542

 
 
632

 
Total liabilities and shareholders’ equity
$
346,328

 
 
$
358,175

 
 
$
350,786

 
 
$
345,709

 
 
$
342,515

 
Net interest margin
 
1.26
%
 
 
1.22
%
 
 
1.14
%
 
 
1.15
%
 
 
1.14
%
Net interest margin (FTE) – Non-GAAP (b)
 
1.26
%
 
 
1.23
%
 
 
1.16
%
 
 
1.16
%
 
 
1.16
%
(a)    Includes the impact of offsetting under enforceable netting agreements of approximately $18 billion for 2Q18, $14 billion for 1Q18, $14 billion for 4Q17, $7 billion for 3Q17 and $1 billion for 2Q17.
(b)    See "Supplemental Information - Explanation of GAAP and Non-GAAP Financial Measures" beginning on page 18 for the reconciliation of this Non-GAAP measure.
Note: Interest and average rates were calculated on an FTE basis, at tax rates of approximately 21% for quarters in 2018 and approximately 35% for quarters in 2017, using dollar amounts in thousands and the actual number of days in the year.

7



THE BANK OF NEW YORK MELLON CORPORATION
 
 
 
 
BNYLOGO01A04.JPG
 
NONINTEREST EXPENSE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2Q18 vs.
 
 
 
 
YTD18 vs.

(dollars in millions)
2Q18

1Q18

 
4Q17

3Q17

2Q17

 
1Q18
2Q17
 
YTD18

YTD17

 
YTD17

Staff (a)
$
1,489

$
1,576

 
$
1,628

$
1,485

$
1,432

 
(6
)%
4
 %
 
$
3,065

$
2,920

 
5
 %
Professional, legal and other purchased services
328

291

 
339

305

319

 
13

3

 
619

632

 
(2
)
Software and equipment
266

234

 
297

233

232

 
14

15

 
500

455

 
10

Net occupancy
156

139

 
153

141

140

 
12

11

 
295

276

 
7

Sub-custodian and clearing (b)
110

119

 
102

101

108

 
(8
)
2

 
229

211

 
9

Distribution and servicing
106

106

 
106

109

104

 
—

2

 
212

204

 
4

Business development
62

51

 
66

49

63

 
22

(2
)
 
113

114

 
(1
)
Bank assessment charges
47

52

 
53

51

59

 
(10
)
(20
)
 
99

116

 
(15
)
Amortization of intangible assets
48

49

 
52

52

53

 
(2
)
(9
)
 
97

105

 
(8
)
Other (a)(b)(c)
135

122

 
210

128

145

 
11

(7
)
 
257

264

 
(3
)
Total noninterest expense
$
2,747

$
2,739

 
$
3,006

$
2,654

$
2,655

 
—
 %
3
 %
 
$
5,486

$
5,297

 
4
 %
 
 
 
 
 
 
 
 
 
 
 


 

Full-time employees at period end
52,000

52,100

 
52,500

52,900

52,800

 
—
 %
(2
)%
 
 
 
 
 
(a)    In 1Q18, we adopted new accounting guidance included in ASU 2017-07, Compensation-Retirement Benefits - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which required the reclassification of the components of pension and other post-retirement costs, other than the service cost component. As a result, staff expense increased and other expense decreased. Prior periods have been reclassified.
(b)    Beginning in 1Q18, clearing expense, which was previously included in other expense, was included with sub-custodian expense. Prior periods have been reclassified.
(c)    Beginning in 1Q18, M&I, litigation and restructuring charges are no longer separately disclosed. Expenses previously reported in this line have been reclassified to existing expense categories, primarily other expense.


8



THE BANK OF NEW YORK MELLON CORPORATION
 
 
BNYLOGO01A04.JPG
 
CAPITAL AND LIQUIDITY
 
 
 
 
 
 
 
 
2018
 
2017
(dollars in millions)
June 30

March 31

 
Dec. 31

Sept. 30

June 30

Consolidated regulatory capital ratios - fully phased-in basis: (a)
 
 
 
 
 
 
Standardized Approach:
 
 
 
 
 
 
CET1 capital
$
18,386

$
18,334

 
$
17,838

$
18,141

$
17,629

Tier 1 capital
21,877

21,835

 
21,339

21,649

21,147

Total capital
23,375

23,340

 
22,838

23,157

21,960

Risk-weighted assets
152,658

156,472

 
155,324

152,995

152,645

 
 
 
 
 
 
 
CET1 ratio
12.0
%
11.7
%
 
11.5
%
11.9
%
11.5
%
Tier 1 capital ratio
14.3

14.0

 
13.7

14.2

13.9

Total capital ratio
15.3

14.9

 
14.7

15.1

14.4

 
 
 
 
 
 
 
Advanced Approaches:
 
 
 
 
 
 
CET1 capital
$
18,386

$
18,334

 
$
17,838

$
18,141

$
17,629

Tier 1 capital
21,877

21,835

 
21,339

21,649

21,147

Total capital
23,175

23,121

 
22,608

22,941

21,749

Risk-weighted assets
167,220

171,910

 
173,711

169,293

169,478

 
 
 
 
 
 
 
CET1 ratio
11.0
%
10.7
%
 
10.3
%
10.7
%
10.4
%
Tier 1 capital ratio
13.1

12.7

 
12.3

12.8

12.5

Total capital ratio
13.9

13.4

 
13.0

13.6

12.8

 
 
 
 
 
 
 
Tier 1 leverage ratio
6.7
%
6.5
%
 
6.4
%
6.6
%
6.5
%
 
 
 
 
 
 
 
SLR:
 
 
 
 
 
 
Leverage exposure
$
355,715

$
367,818

 
$
360,543

$
355,960

$
352,448

SLR
6.2
%
5.9
%
 
5.9
%
6.1
%
6.0
%
 
 
 
 
 
 
 
Average liquidity coverage ratio (“LCR”)
118
%
116
%
 
118
%
119
%
116
%
 
 
 
 
 
 
 
Consolidated regulatory capital ratios - transitional basis:
 
 
 
 
 
 
Advanced Approaches:
 
 
 
 
 
 
CET1 ratio
N/A

N/A

 
10.7
%
11.1
%
10.8
%
Tier 1 capital ratio
N/A

N/A

 
12.7

13.2

12.9

Total capital ratio
N/A

N/A

 
13.4

14.0

13.2

 
 
 
 
 
 
 
Tier 1 leverage ratio
N/A

N/A

 
6.6
%
6.8
%
6.7
%
SLR
N/A

N/A

 
6.1

6.3

6.2

(a)    Regulatory capital ratios for June 30, 2018 are preliminary. For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under the U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced Approaches, which for the periods noted above was the Advanced Approaches.
N/A - Not applicable. Beginning Jan. 1, 2018, regulatory capital ratios are fully phased-in.


9



THE BANK OF NEW YORK MELLON CORPORATION
BNYLOGO01A04.JPG

 
 
 
BNYLOGO01A04.JPG
KEY MARKET METRICS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2Q18 vs.
 
 
 
 
YTD18 vs.

2Q18

1Q18

 
4Q17

3Q17

2Q17

 
1Q18
2Q17
 
YTD18

YTD17

 
YTD17
Key market metrics:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
S&P 500 Index  (a)
2718

2641

 
2674

2519

2423

 
3
 %
12
 
2718

2423

 
12
S&P 500 Index - daily average
2703

2733

 
2603

2467

2398

 
(1
)
13
 
2718

2362

 
15
FTSE 100 Index  (a)
7637

7057

 
7688

7373

7313

 
8

4
 
7637

7313

 
4
FTSE 100 Index - daily average
7549

7354

 
7477

7380

7391

 
3

2
 
7451

7331

 
2
MSCI EAFE (a)
1959

2006

 
2051

1974

1883

 
(2
)
4
 
1959

1883

 
4
MSCI EAFE - daily average
2018

2073

 
2005

1934

1856

 
(3
)
9
 
2045

1803

 
13
Barclays Capital Global Aggregate Bond SM  Index (a)(b)
478

491

 
485

480

471

 
(3
)
1
 
478

471

 
1
NYSE and NASDAQ share volume (in billions)
208

210

 
188

179

199

 
(1
)
5
 
418

385

 
9
Average interest on excess reserves paid by the Federal Reserve
1.79
%
1.53
%
 
1.30
%
1.25
%
1.04
%
 
26
  bps
75
 
1.66
%
0.92
%
 
74
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange rates vs. U.S. dollar:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
British pound (a)
$
1.32

$
1.41

 
$
1.35

$
1.34

$
1.30

 
(6
)%
2
 
$
1.32

$
1.30

 
2
British pound - average rate
1.36

1.39

 
1.33

1.31

1.28

 
(2
)
6
 
1.38

1.26

 
10
Euro (a)
1.17

1.23

 
1.20

1.18

1.14

 
(5
)
3
 
1.17

1.14

 
3
Euro - average rate
1.19

1.23

 
1.18

1.17

1.10

 
(3
)
8
 
1.21

1.08

 
12
(a)    Period end.
(b)    Unhedged in U.S. dollar terms.
bps - basis points.

10



THE BANK OF NEW YORK MELLON CORPORATION
 
 
 
BNYLOGO01A04.JPG
 
INVESTMENT SERVICES BUSINESS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2Q18 vs.
 
 
 
 
YTD18 vs.

(dollars in millions)
2Q18

1Q18

 
4Q17

3Q17

2Q17

 
1Q18
2Q17
 
YTD18

YTD17

 
YTD17

Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment services fees:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset servicing (ex. securities lending revenue)
$
1,080

$
1,095

 
$
1,061

$
1,040

$
1,019

 
(1
)%
6
 %
 
$
2,175

$
2,017

 
8
 %
Securities lending revenue
55

48

 
45

41

42

 
15

31

 
103

82

 
26

Clearing services
391

414

 
400

381

393

 
(6
)
(1
)
 
805

768

 
5

Issuer services
265

260

 
196

288

241

 
2

10

 
525

491

 
7

Treasury services
140

138

 
136

141

139

 
1

1

 
278

278

 
—

Total investment services fees
1,931

1,955

 
1,838

1,891

1,834

 
(1
)
5

 
3,886

3,636

 
7

Foreign exchange and other trading revenue
172

169

 
168

154

145

 
2

19

 
341

298

 
14

Other (a)
130

126

 
135

142

136

 
3

(4
)
 
256

265

 
(3
)
Total fee and other revenue
2,233

2,250

 
2,141

2,187

2,115

 
(1
)
6

 
4,483

4,199

 
7

Net interest revenue
874

844

 
813

777

761

 
4

15

 
1,718

1,468

 
17

Total revenue
3,107

3,094

 
2,954

2,964

2,876

 
—

8

 
6,201

5,667

 
9

Provision for credit losses
1

(7
)
 
(2
)
(2
)
(3
)
 
N/M

N/M

 
(6
)
(3
)
 
N/M

Noninterest expense (ex. amortization of intangible assets)
1,931

1,913

 
2,060

1,837

1,889

 
1

2

 
3,844

3,701

 
4

Amortization of intangible assets
36

36

 
37

37

38

 
—

(5
)
 
72

75

 
(4
)
Total noninterest expense
1,967

1,949

 
2,097

1,874

1,927

 
1

2

 
3,916

3,776

 
4

Income before taxes
$
1,139

$
1,152

 
$
859

$
1,092

$
952

 
(1
)%
20
 %
 
$
2,291

$
1,894

 
21
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax operating margin
37
%
37
%
 
29
%
37
%
33
%
 
 
 
 
37
%
33
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenue by line of business:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset Servicing
$
1,520

$
1,519

 
$
1,459

$
1,420

$
1,378

 
—
 %
10
 %
 
$
3,039

$
2,724

 
12
 %
Pershing
558

581

 
569

542

547

 
(4
)
2

 
1,139

1,069

 
7

Issuer Services
431

418

 
352

442

398

 
3

8

 
849

794

 
7

Treasury Services
329

321

 
322

316

311

 
2

6

 
650

613

 
6

Clearance and Collateral Management
269

255

 
252

244

242

 
5

11

 
524

467

 
12

Total revenue by line of business
$
3,107

$
3,094

 
$
2,954

$
2,964

$
2,876

 
—
 %
8
 %
 
$
6,201

$
5,667

 
9
 %
(a)    Other revenue includes investment management fees, financing-related fees, distribution and servicing revenue and investment and other income.
N/M - Not meaningful.


11



THE BANK OF NEW YORK MELLON CORPORATION
 
 
 
 
BNYLOGO01A04.JPG
 
INVESTMENT SERVICES BUSINESS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2Q18 vs.
 
 
 
 
YTD18 vs.

(dollars in millions unless otherwise noted)
2Q18

1Q18

 
4Q17

3Q17

2Q17

 
1Q18
2Q17
 
YTD18

YTD17

 
YTD17

Average loans
$
38,002

$
39,200

 
$
38,845

$
38,038

$
40,931

 
(3
)%
(7
)%
 
$
38,598

$
41,870

 
(8
)%
Average assets
$
264,387

$
278,095

 
$
260,494

$
252,461

$
254,724

 
(5
)%
4
 %
 
$
271,203

$
253,031

 
7
 %
Average deposits
$
203,064

$
214,130

 
$
204,680

$
198,299

$
200,417

 
(5
)%
1
 %
 
$
208,567

$
199,206

 
5
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AUC/A at period end (in trillions) (a)(b)
$
33.6

$
33.5

 
$
33.3

$
32.2

$
31.1

 
—

8
 %
 
$
33.6

$
31.1

 
8
 %
Market value of securities on loan at period end (in billions) (c)
$
432

$
436

 
$
408

$
382

$
336

 
(1
)%
29
 %
 
$
432

$
336

 
29
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pershing
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average active clearing accounts (U.S. platform) ( in thousands)
6,080

6,075

 
6,126

6,203

6,159

 
—

(1
)%
 
 
 
 
 
Average long-term mutual fund assets (U.S. platform)
$
512,645

$
514,542

 
$
508,873

$
500,998

$
480,532

 
—

7
 %
 
 
 
 
 
Average investor margin loans (U.S. platform)
$
10,772

$
10,930

 
$
9,822

$
8,886

$
9,812

 
(1
)%
10
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Clearance and Collateral Management
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average tri-party collateral management balances ( in billions)
$
2,801

$
2,698

 
$
2,606

$
2,534

$
2,498

 
4
 %
12
 %
 
 
 
 
 
(a)    June 30, 2018 information is preliminary.
(b)    Includes the AUC/A of CIBC Mellon of $1.4 trillion at June 30, 2018, $1.3 trillion at March 31, 2018, Dec. 31, 2017 and Sept. 30, 2017 and $1.2 trillion at June 30, 2017.
(c)    Represents the total amount of securities on loan in our agency securities lending program managed by the Investment Services business. Excludes securities for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, which totaled $70 billion at June 30, 2018, $73 billion at March 31, 2018, $71 billion at Dec. 31, 2017, $68 billion at Sept. 30, 2017 and $66 billion at June 30, 2017.


12



THE BANK OF NEW YORK MELLON CORPORATION
 
 
 
BNYLOGO01A04.JPG
 
INVESTMENT MANAGEMENT BUSINESS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2Q18 vs.
 
 
 
 
YTD18 vs.

(dollars in millions)
2Q18

1Q18

 
4Q17

3Q17

2Q17

 
1Q18
2Q17
 
YTD18

YTD17

 
YTD17

Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment management fees (a)
$
885

$
898

 
$
898

$
871

$
845

 
(1
)%
5
 %
 
$
1,783

$
1,659

 
7
 %
Performance fees
12

48

 
50

15

17

 
(75
)
(29
)
 
60

29

 
107

Investment management and performance fees (b)
897

946

 
948

886

862

 
(5
)
4

 
1,843

1,688

 
9

Distribution and servicing
48

50

 
51

51

53

 
(4
)
(9
)
 
98

105

 
(7
)
Other (a)
(4
)
16

 
(25
)
(19
)
(16
)
 
N/M

N/M

 
12

(17
)
 
N/M

Total fee and other revenue (a)
941

1,012

 
974

918

899

 
(7
)
5

 
1,953

1,776

 
10

Net interest revenue
77

76

 
74

82

87

 
1

(11
)
 
153

173

 
(12
)
Total revenue
1,018

1,088

 
1,048

1,000

986

 
(6
)
3

 
2,106

1,949

 
8

Provision for credit losses
2

2

 
1

(2
)
—

 
N/M

N/M

 
4

3

 
N/M

Noninterest expense (ex. amortization of intangible assets)
685

692

 
756

687

683

 
(1
)
—

 
1,377

1,351

 
2

Amortization of intangible assets
12

13

 
15

15

15

 
(8
)
(20
)
 
25

30

 
(17
)
Total noninterest expense
697

705

 
771

702

698

 
(1
)
—

 
1,402

1,381

 
2

Income before taxes
$
319

$
381

 
$
276

$
300

$
288

 
(16
)%
11
 %
 
$
700

$
565

 
24
 %
Income before taxes (ex. amortization of intangible assets) – Non-GAAP
$
331

$
394

 
$
291

$
315

$
303

 
(16
)%
9
 %
 
$
725

$
595

 
22
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax operating margin
31
%
35
%
 
26
%
30
%
29
%
 
 
 
 
33
%
29
%
 
 
Adjusted pre-tax operating margin – Non-GAAP  (c)
35
%
39
%
 
29
%
34
%
33
%
 
 
 
 
37
%
32
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenue by line of business:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset Management
$
702

$
770

 
$
738

$
693

$
683

 
(9
)%
3
 %
 
$
1,472

$
1,344

 
10
 %
Wealth Management
316

318

 
310

307

303

 
(1
)
4

 
634

605

 
5

Total revenue by line of business
$
1,018

$
1,088

 
$
1,048

$
1,000

$
986

 
(6
)%
3
 %
 
$
2,106

$
1,949

 
8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average loans
$
16,974

$
16,876

 
$
16,813

$
16,724

$
16,560

 
1
 %
3
 %
 
$
16,926

$
16,358

 
3
 %
Average assets
$
31,504

$
31,963

 
$
31,681

$
31,689

$
31,355

 
(1
)%
—
 %
 
$
31,732

$
31,212

 
2
 %
Average deposits
$
14,252

$
13,363

 
$
11,633

$
12,374

$
14,866

 
7
 %
(4
)%
 
$
13,810

$
15,380

 
(10
)%
(a)    Total fee and other revenue includes the impact of the consolidated investment management funds, net of noncontrolling interests. Additionally, other revenue includes asset servicing, treasury services, foreign exchange and other trading revenue and investment and other income.
(b)    On a constant currency basis, investment management and performance fees increased 2% (Non-GAAP) compared with 2Q17. See "Supplemental Information - Explanation of GAAP and Non-GAAP Financial Measures" beginning on page 18 for the reconciliation of this Non-GAAP measure.
(c)    Net of distribution and servicing expense. See "Supplemental Information - Explanation of GAAP and Non-GAAP Financial Measures" beginning on page 18 for the reconciliation of this Non-GAAP measure. In 1Q18, the adjusted pre-tax margin  – Non-GAAP for prior periods was restated to include amortization of intangible assets and the provision for credit losses.
N/M - Not meaningful.

13



THE BANK OF NEW YORK MELLON CORPORATION
 
 
 
BNYLOGO01A04.JPG
 
AUM BY PRODUCT, AUM FLOWS AND WEALTH MANAGEMENT CLIENT ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2Q18 vs.
 
 
 
 
YTD18 vs.

(dollars in billions)
2Q18

1Q18

 
4Q17

3Q17

2Q17

 
1Q18
2Q17
 
YTD18

YTD17

 
YTD17

AUM by product type  (a)(b)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity
$
160

$
161

 
$
161

$
158

$
163

 
(1
)%
(2
)%
 
 
 
 
 
Fixed income
197

206

 
206

206

198

 
(4
)
(1
)
 
 
 
 
 
Index
334

333

 
350

333

324

 
—

3

 
 
 
 
 
Liability-driven investments, including currency overlay
663

700

 
667

622

607

 
(5
)
9

 
 
 
 
 
Multi-asset and alternative investments
181

185

 
214

207

192

 
(2
)
(6
)
 
 
 
 
 
Cash
270

283

 
295

298

287

 
(5
)
(6
)
 
 
 
 
 
Total AUM by product type
$
1,805

$
1,868

 
$
1,893

$
1,824

$
1,771

 
(3
)%
2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Changes in AUM   (a)(b)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance of AUM
$
1,868

$
1,893

 
$
1,824

$
1,771

$
1,727

 
 
 
 
$
1,893

$
1,648

 
 
Net (outflows) inflows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term strategies:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity
(3
)
—

 
(6
)
(2
)
(2
)
 
 
 
 
(3
)
(6
)
 
 
Fixed income
(4
)
7

 
(2
)
4

2

 
 
 
 
3

4

 
 
Liability-driven investments, including currency overlay
2

13

 
23

(2
)
15

 
 
 
 
15

29

 
 
Multi-asset and alternative investments
(3
)
(3
)
 
2

3

1

 
 
 
 
(6
)
3

 
 
Total long-term active strategies (outflows) inflows
(8
)
17

 
17

3

16

 
 
 
 
9

30

 
 
Index
(7
)
(13
)
 
(1
)
(3
)
(13
)
 
 
 
 
(20
)
(13
)
 
 
Total long-term strategies (outflows) inflows
(15
)
4

 
16

—

3

 
 
 
 
(11
)
17

 
 
Short-term strategies:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash
(11
)
(14
)
 
(4
)
10

11

 
 
 
 
(25
)
24

 
 
Total net (outflows) inflows
(26
)
(10
)
 
12

10

14

 
 
 
 
(36
)
41

 
 
Net market impact
17

(14
)
 
47

17

1

 
 
 
 
3

42

 
 
Net currency impact
(53
)
29

 
10

26

29

 
 
 
 
(24
)
40

 
 
Divestiture/Other (c)
(1
)
(30
)
 
—

—

—

 
 
 
 
(31
)
—

 
 
Ending balance of AUM
$
1,805

$
1,868

 
$
1,893

$
1,824

$
1,771

 
(3
)%
2
 %
 
$
1,805

$
1,771

 
2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Wealth Management client assets (a)(d)
$
254

$
246

 
$
251

$
245

$
239


3
 %
6
 %
 
 
 
 
 
(a)    June 30, 2018 information is preliminary.
(b)    Excludes securities lending cash management assets and assets managed in the Investment Services business.
(c)    Primarily reflects a change in methodology beginning in 1Q18 to exclude AUM related to equity method investments as well as the CenterSquare divestiture.
(d)    Includes AUM and AUC/A in the Wealth Management business.



14



THE BANK OF NEW YORK MELLON CORPORATION
 
 
 
BNYLOGO01A04.JPG
 
OTHER SEGMENT
 
 
 
 
 
 
 
 
 
 
(in millions)
2Q18

1Q18

 
4Q17

3Q17

2Q17

Fee revenue
$
40

$
57

 
$
(221
)
$
50

$
113

Net securities gains (losses)
1

(49
)
 
(26
)
19

—

Total fee and other revenue (loss)
41

8

 
(247
)
69

113

Net interest (expense)
(35
)
(1
)
 
(36
)
(20
)
(22
)
Total revenue (loss)
6

7

 
(283
)
49

91

Provision for credit losses
(6
)
—

 
(5
)
(2
)
(4
)
Noninterest expense
81

87

 
135

77

28

(Loss) income before taxes
$
(69
)
$
(80
)
 
$
(413
)
$
(26
)
$
67

 
 
 
 
 
 
 
Average loans and leases
$
2,090

$
2,530

 
$
1,114

$
1,182

$
1,302

Average assets
$
50,437

$
48,117

 
$
58,611

$
61,559

$
56,436



15



THE BANK OF NEW YORK MELLON CORPORATION
 
 
 
 
 
 
BNYLOGO01A04.JPG
 
INVESTMENT SECURITIES PORTFOLIO
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(dollars in millions)
March 31, 2018

 
2Q18
change in
unrealized
gain (loss)

June 30, 2018
 
Fair value
as a % of amortized
cost  (a)

Unrealized
gain (loss)

 
Ratings (b)
Amortized
cost

Fair value

 
 
AAA/
AA-
A+/
A-
BBB+/
BBB-
BB+ and
lower
Not
rated
 Fair value

 
 
Agency RMBS
$
49,093

 
$
(145
)
$
50,906

$
49,741

 
98
%
$
(1,165
)
 
100
%
—
%
—
%
—
%
—
%
U.S. Treasury
23,545

 
17

24,106

23,962

 
99

(144
)
 
100

—

—

—

—

Sovereign debt/sovereign guaranteed
14,732

 
(26
)
12,976

13,069

 
101

93

 
74

6

19

1

—

Agency commercial MBS
10,805

 
105

11,096

11,019

 
99

(77
)
 
100

—

—

—

—

U.S. Government agencies
2,669

 
(2
)
3,284

3,269

 
100

(15
)
 
100

—

—

—

—

CLOs
3,129

 
(10
)
3,179

3,177

 
100

(2
)
 
98

—

—

1

1

Foreign covered bonds
2,806

 
(2
)
2,980

2,976

 
100

(4
)
 
100

—

—

—

—

State and political subdivisions
2,742

 
7

2,653

2,646

 
100

(7
)
 
76

16

4

—

4

Non-agency RMBS (c)
1,745

 
(22
)
1,340

1,621

 
121

281

 
7

9

9

60

15

Non-agency commercial MBS
1,532

 
(148
)
1,403

1,391

 
99

(12
)
 
96

4

—

—

—

Corporate bonds
1,222

 
(7
)
1,167

1,146

 
98

(21
)
 
13

71

16

—

—

Other (d)
4,183

 
—

4,497

4,484

 
100

(13
)
 
82

16

—

—

2

Total investment securities
$
118,203

(e)
$
(233
)
$
119,587

$
118,501

(e)
99
%
$
(1,086
)
(e)(f)
94
%
2
%
3
%
1
%
—
%
(a)    Amortized cost reflects historical impairments.
(b)    Represents ratings by S&P, or the equivalent.
(c)    Includes RMBS that were included in the former Grantor Trust of $1,019 million at March 31, 2018 and $943 million at June 30, 2018.
(d)    Includes commercial paper with a fair value of $700 million at March 31, 2018 and $699 million at June 30, 2018.
(e)    Includes net unrealized gains on derivatives hedging securities available-for-sale of $238 million at March 31, 2018 and net unrealized gains of $373 million at June 30, 2018.
(f)    Unrealized losses of $133 million at June 30, 2018 related to available-for-sale securities, net of hedges.


16



THE BANK OF NEW YORK MELLON CORPORATION
 
 
 
BNYLOGO01A04.JPG
 
ALLOWANCE FOR CREDIT LOSSES AND NONPERFORMING ASSETS
 
 
 
 
 
 
2018
 
2017
(dollars in millions)
June 30

March 31

 
Dec. 31

Sept. 30

June 30

Allowance for credit losses - beginning of period:
 
 
 
 
 
 
Allowance for loan losses
$
156

$
159

 
$
161

$
165

$
164

Allowance for lending-related commitments
100

102

 
104

105

112

Allowance for credit losses - beginning of period
$
256

$
261

 
$
265

$
270

$
276

 
 
 
 
 
 
 
Net recoveries (charge-offs):
 
 
 
 
 
 
Charge-offs
—

—

 
—

—

—

Recoveries
1

—

 
2

1

1

Total net recoveries (charge-offs)
1

—

 
2

1

1

Provision for credit losses
(3
)
(5
)
 
(6
)
(6
)
(7
)
Allowance for credit losses - end of period
$
254

$
256

 
$
261

$
265

$
270

 
 
 
 
 
 
 
Allowance for credit losses - end of period:
 
 
 
 
 
 
Allowance for loan losses
$
145

$
156

 
$
159

$
161

$
165

Allowance for lending-related commitments
109

100

 
102

104

105

Allowance for credit losses - end of period
$
254

$
256

 
$
261

$
265

$
270

 
 
 
 
 
 
 
Allowance for loan losses as a percentage of total loans
0.25
%
0.26
%
 
0.26
%
0.27
%
0.27
%
 
 
 
 
 
 
 
Nonperforming assets
$
82

$
85

 
$
90

$
94

$
100



17



THE BANK OF NEW YORK MELLON CORPORATION
 
 
 
BNYLOGO01A04.JPG
 
SUPPLEMENTAL INFORMATION – EXPLANATION OF GAAP AND NON-GAAP FINANCIAL MEASURES
 
 
 
 
 
 
 
 
 
BNY Mellon has included in this Financial Supplement certain Non-GAAP financial measures on a tangible basis, as a supplement to GAAP information. Tangible common shareholders’ equity excludes goodwill and intangible assets, net of deferred tax liabilities. BNY Mellon believes that the return on tangible common equity measure is an additional useful measure for investors because it presents a measure of those assets that can generate income. BNY Mellon has provided a measure of tangible book value per common share, which it believes provides additional useful information as to the level of tangible assets in relation to shares of common stock outstanding.
 
 
 
 
 
 
Net interest revenue (FTE) – Non-GAAP and net interest margin (FTE) – Non-GAAP include the tax equivalent adjustments on tax-exempt income which allows for the comparison of amounts arising from both taxable and tax-exempt sources and is consistent with industry practice. The adjustment to an FTE basis has no impact on net income.
 
 
 
 
 
 
BNY Mellon has presented the operating margin for the Investment Management business net of distribution and servicing expense that was passed to third parties who distribute or service our managed funds. BNY Mellon believes that this measure is useful when evaluating the performance of the Investment Management business relative to industry competitors.
 
 
 
 
 
 
The presentation of the growth rates of investment management and performance fees on a constant currency basis permits investors to assess the significance of changes in foreign currency exchange rates. Growth rates on a constant currency basis were determined by applying the current period foreign currency exchange rates to the prior period revenue. BNY Mellon believes that this presentation, as a supplement to GAAP information, gives investors a clearer picture of the related revenue results without the variability caused by fluctuations in foreign currency exchange rates.
 
 
 
 
 
 
Notes:
 
 
 
 
 
Certain immaterial reclassifications/revisions have been made to prior periods to place them on a basis comparable with the current period's presentation.
 
 
 
 
 
 
In businesses where average deposits are greater than average loans, average assets include an allocation of investment securities equal to the difference.
 
 
 
 
 
 
Quarterly and year-to-date return on common and tangible common equity ratios are annualized.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Return on common equity and tangible common equity reconciliation
 
 
 
 
 
 
 
 
 
(dollars in millions)
2Q18

1Q18

 
4Q17

3Q17

2Q17

 
YTD18

YTD17

Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP
$
1,055

$
1,135

 
$
1,126

$
983

$
926

 
$
2,190

$
1,806

Add: Amortization of intangible assets
48

49

 
52

52

53

 
97

105

Less: Tax impact of amortization of intangible assets
11

12

 
18

17

19

 
23

37

Adjusted net income applicable to common shareholders of The Bank of New York Mellon Corporation, excluding amortization of intangible assets – Non-GAAP
$
1,092

$
1,172

 
$
1,160

$
1,018

$
960

 
$
2,264

$
1,874

 
 
 
 
 
 
 
 
 
 
Average common shareholders’ equity
$
37,750

$
37,593

 
$
36,952

$
36,780

$
35,862

 
$
37,672

$
35,416

Less: Average goodwill
17,505

17,581

 
17,518

17,497

17,408

 
17,543

17,373

 Average intangible assets
3,341

3,397

 
3,437

3,487

3,532

 
3,369

3,555

Add: Deferred tax liability – tax deductible goodwill (a)
1,054

1,042

 
1,034

1,561

1,542

 
1,054

1,542

 Deferred tax liability – intangible assets (a)
709

716

 
718

1,092

1,095

 
709

1,095

Average tangible common shareholders’ equity – Non-GAAP
$
18,667

$
18,373

 
$
17,749

$
18,449

$
17,559

 
$
18,523

$
17,125

 
 
 
 
 
 
 
 
 
 
Return on common equity – GAAP
11.2
%
12.2
%
 
12.1
%
10.6
%
10.4
%
 
11.7
%
10.3
%
Return on tangible common equity – Non-GAAP
23.5
%
25.9
%
 
25.9
%
21.9
%
21.9
%
 
24.6
%
22.1
%
(a)    Deferred tax liabilities, for the prior periods, are based on fully phased-in U.S. capital rules.


18



THE BANK OF NEW YORK MELLON CORPORATION
BNYLOGO01A04.JPG
 
SUPPLEMENTAL INFORMATION – EXPLANATION OF GAAP AND NON-GAAP FINANCIAL MEASURES

Book value and tangible book value per common share reconciliation
2018
 
2017
(dollars in millions except common shares)
June 30

March 31

 
Dec. 31

Sept. 30

June 30

BNY Mellon shareholders’ equity at period end – GAAP
$
41,505

$
41,728

 
$
41,251

$
40,523

$
39,974

Less: Preferred stock
3,542

3,542

 
3,542

3,542

3,542

BNY Mellon common shareholders’ equity at period end – GAAP
37,963

38,186

 
37,709

36,981

36,432

Less: Goodwill
17,418

17,596

 
17,564

17,543

17,457

Intangible assets
3,308

3,370

 
3,411

3,461

3,506

Add: Deferred tax liability – tax deductible goodwill (a)
1,054

1,042

 
1,034

1,561

1,542

Deferred tax liability – intangible assets (a)
709

716

 
718

1,092

1,095

BNY Mellon tangible common shareholders’ equity at period end – Non-GAAP
$
19,000

$
18,978

 
$
18,486

$
18,630

$
18,106

 
 
 
 
 
 
 
Period-end common shares outstanding (in thousands)
999,945

1,010,676

 
1,013,442

1,024,022

1,033,156

 
 
 
 
 
 
 
Book value per common share – GAAP
$
37.97

$
37.78

 
$
37.21

$
36.11

$
35.26

Tangible book value per common share – Non-GAAP
$
19.00

$
18.78

 
$
18.24

$
18.19

$
17.53

(a)    Deferred tax liabilities, for the prior periods, are based on fully phased-in U.S. capital rules.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin reconciliation
 
 
 
 
 
 
(dollars in millions)
2Q18

1Q18

 
4Q17

3Q17

2Q17

Net interest revenue – GAAP
$
916

$
919

 
$
851

$
839

$
826

Add: Tax equivalent adjustment
5

6

 
11

12

12

Net interest revenue (FTE) – Non-GAAP
$
921

$
925

 
$
862

$
851

$
838

 
 
 
 
 
 
 
Average interest-earning assets
$
292,086

$
302,069

 
$
297,166

$
291,841

$
289,496

 
 
 
 
 
 
 
Net interest margin – GAAP (a)
1.26
%
1.22
%
 
1.14
%
1.15
%
1.14
%
Net interest margin (FTE) – Non-GAAP (a)
1.26
%
1.23
%
 
1.16
%
1.16
%
1.16
%
(a)    Net interest margin is annualized.


19



THE BANK OF NEW YORK MELLON CORPORATION
 
 
 
BNYLOGO01A04.JPG
 
SUPPLEMENTAL INFORMATION – EXPLANATION OF GAAP AND NON-GAAP FINANCIAL MEASURES
 
Pre-tax operating margin reconciliation - Investment Management business
 
 
 
 
 
 
 
 
 
(dollars in millions)
2Q18

1Q18

 
4Q17

3Q17

2Q17

 
YTD18

YTD17

Income before income taxes – GAAP
$
319

$
381

 
$
276

$
300

$
288

 
$
700

$
565

 
 
 
 
 
 
 
 
 
 
Total revenue – GAAP
$
1,018

$
1,088

 
$
1,048

$
1,000

$
986

 
$
2,106

$
1,949

Less: Distribution and servicing expense
103

110

 
107

110

104

 
213

205

Adjusted total revenue, net of distribution and servicing expense – Non-GAAP
$
915

$
978

 
$
941

$
890

$
882

 
$
1,893

$
1,744

 
 
 
 
 
 
 
 
 
 
Pre-tax operating margin – GAAP (a)
31
%
35
%
 
26
%
30
%
29
%
 
33
%
29
%
Adjusted pre-tax operating margin, net of distribution and servicing expense – Non-GAAP (a)
35
%
39
%
 
29
%
34
%
33
%
 
37
%
32
%
(a)    Income before taxes divided by total revenue.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Constant currency reconciliations
 
 
 
2Q18 vs.

 
 
 
 
 
(dollars in millions)
2Q18

2Q17

 
2Q17

 
 
 
 
 
Consolidated:
 
 
 
 
 
 
 
 
 
Investment management and performance fees
$
910

$
879

 
4
%
 
 
 
 
 
Impact of changes in foreign currency exchange rates
—

20

 
 
 
 
 
 
 
Adjusted investment management and performance fees – Non-GAAP
$
910

$
899

 
1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment Management business:
 
 
 
 
 
 
 
 
 
Investment management and performance fees
$
897

$
862

 
4
%
 
 
 
 
 
Impact of changes in foreign currency exchange rates
—

20

 
 
 
 
 
 
 
Adjusted investment management and performance fees – Non-GAAP
$
897

$
882

 
2
%
 
 
 
 
 


20

BNY Mellon Second Quarter 2018 Financial Highlights July 19, 2018

 
Cautionary Statement A number of statements in our presentations, the accompanying slides and the responses to your questions are “forward-looking statements.” Words such as “estimate”, “forecast”, “project”, “anticipate”, “target”, “expect”, “intend”, “continue”, “seek”, “believe”, “plan”, “goal”, “could”, “should”, “may”, “will”, “strategy”, “opportunities”, “trends” and words of similar meaning signify forward-looking statements. These statements relate to, among other things, The Bank of New York Mellon Corporation’s (the “Corporation”) expectations regarding: capital plans, strategic priorities, financial goals, driving revenue growth, expenses, including costs associated with the Corporation’s relocation strategy and timing of such costs, deposits, taxes, business opportunities, preliminary business metrics and regulatory capital ratios; and statements regarding the Corporation's aspirations, as well as the Corporation’s overall plans, strategies, goals, objectives, expectations, outlooks, estimates, intentions, targets, opportunities and initiatives. These forward-looking statements are based on assumptions that involve risks and uncertainties and that are subject to change based on various important factors (some of which are beyond the Corporation’s control). Actual outcomes may differ materially from those expressed or implied as a result of the factors described under “Forward Looking Statements” and “Risk Factors” in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017 (the “2017 Annual Report”) and in other filings of the Corporation with the Securities and Exchange Commission (the “SEC”). Such forward-looking statements speak only as of July 19, 2018, and the Corporation undertakes no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events. For additional information regarding the Corporation, please refer to the Corporation's SEC filings available at www.bnymellon.com/investorrelations. Non-GAAP Measures: In this presentation we discuss some non-GAAP measures in detailing the Corporation’s performance, which exclude certain items or otherwise include components that differ from GAAP. We believe these measures are useful to the investment community in analyzing the financial results and trends of ongoing operations. We believe they facilitate comparisons with prior periods and reflect the principal basis on which our management monitors financial performance. Additional disclosures relating to non-GAAP measures are contained in the Corporation’s reports filed with the SEC, including the 2017 Annual Report, and are available at www.bnymellon.com/ investorrelations. 2 Second Quarter 2018 – Financial Highlights

 
Second Quarter 2018 - Financial Highlights Growth vs. ($ in millions, except per share data) 2Q18 1Q18 2Q17 Financial Performance Fee revenue $ 3,209 (3)% 3% • Earnings of $1.06 billion or $1.03 earnings per Net securities gains (losses) 1 N/M N/M common share ◦ Positive operating leverage of 113 bps Fee and other revenue 3,210 (2) 3 Income (loss) from consolidated investment 12 N/M N/M • Estimated cost of relocating corporate management funds headquarters of $75 million Net interest revenue 916 — 11 ◦ $12 million recorded in 2Q18 and expect Total revenue 4,138 (1) 5 remainder in 4Q18 Provision for credit losses (3) N/M N/M • Returned $895 million of capital to common Noninterest expenses 2,747 — 3 shareholders Income before income taxes 1,394 (3) 7 ◦ Repurchased 12 million common shares for Net income applicable to common shareholders $ 1,055 (7)% 14% $651 million ◦ Paid $244 million in dividends to common (a) Operating leverage (125) bps +113 bps shareholders Pre-tax operating margin 34% (84) bps +63 bps Earnings per common share $ 1.03 (6)% 17% • Authorized to repurchase $2.4 billion of common shares through 2Q19 and increased Common equity Tier 1 (“CET1”) (b) 11.0% +30 bps +59 bps quarterly dividend 17% to $0.28 per share in Return on common equity (annualized) 11.2% (104) bps +84 bps 3Q18 Return on tangible common equity (“ROTCE”) (c) 23.5% (241) bps +151 bps Note: See page 13 for corresponding footnotes in Appendix. N/M - not meaningful; bps - basis points 3 Second Quarter 2018 – Financial Highlights

 
Second Quarter 2018 - Financial Highlights Total Revenue ($mm) Total Noninterest Expense ($mm) Income Before Income Taxes ($mm) 5% 3% 7% $4,178 $4,138 2,739 2,747 1,444 1,394 1,308 $3,956 2,655 2Q17 1Q18 2Q18 2Q17 1Q18 2Q18 2Q17 1Q18 2Q18 Earnings Per Share Pre-tax Operating Margin ROTCE (a) $ 1.10 35% 25.9% $1.03 34% 23.5% 33% 21.9% $ 0.88 2Q17 1Q18 2Q18 2Q17 1Q18 2Q18 2Q17 1Q18 2Q18 (a) Represents a Non-GAAP measure. See Appendix for reconciliation. 4 Second Quarter 2018 – Financial Highlights

 
Investment Services Business Highlights Growth vs. Business Performance Drivers Financial Highlights ($ millions) 2Q18 1Q18 2Q17 year-over-year Total revenue by line of business: • Asset Servicing, up 10% Asset Servicing $ 1,520 — % 10% ◦ Higher net interest revenue, foreign exchange and securities Pershing 558 (4) 2 lending volumes, equity market values and the favorable impact Issuer Services 431 3 8 Treasury Services 329 2 6 of a weaker U.S. dollar Clearance and Collateral Management 269 5 11 • Pershing, up 2% Total revenue by line of business 3,107 — 8 ◦ Higher net interest revenue and fees due to growth in long-term Provision for credit losses 1 N/M N/M mutual fund balances, partially offset by the impact of lost Noninterest expense 1,967 1 2 business Income before taxes $ 1,139 (1)% 20% Pre-tax operating margin 37% (56) bps 360 bps • Issuer Services, up 8% ◦ Higher net interest revenue in Corporate Trust and higher Growth vs. Depositary Receipts revenue Key Metrics ($ millions unless otherwise noted) 2Q18 1Q18 2Q17 • Treasury Services, up 6% Foreign exchange revenue $ 172 2 % 19 % Securities lending revenue $ 55 15 % 31 % ◦ Higher net interest revenue and payment volumes Average loans $ 38,002 (3)% (7)% • Clearance and Collateral Management, up 11% Average deposits $ 203,064 (5)% 1 % ◦ Growth in collateral management, higher clearance volumes AUC/A at period end (in trillions) (a) $ 33.6 — % 8 % and net interest revenue Market value of securities on loan at period end (in (b) $ 432 (1)% 29 % billions) • Total noninterest expense, up 2% Pershing ◦ Investments in technology ◦ Unfavorable impact of the weaker U.S. dollar Average active clearing accounts (U.S. platform) (in 6,080 — % (1)% thousands) Average long-term mutual fund assets (U.S. platform) $ 512,645 — % 7 % • AUC/A of $33.6 trillion, up 8% Average investor margin loans (U.S. platform) $ 10,772 (1)% 10 % ◦ Reflecting higher market values and business growth Clearance and Collateral Management Average tri-party collateral mgmt. balances (in trillions) $ 2.8 4 % 12 % Note: See page 13 for corresponding footnotes in Appendix. N/M - not meaningful; bps - basis points 5 Second Quarter 2018 – Financial Highlights

 
Investment Management Business Highlights Growth vs. Business Performance Drivers Financial Highlights ($ millions) 2Q18 1Q18 2Q17 year-over-year Total revenue by line of business: • Asset Management, up 3% Asset Management $ 702 (9)% 3% ◦ Higher equity market values Wealth Management 316 (1) 4 ◦ Favorable impact of weaker U.S. dollar Total revenue by line of business 1,018 (6) 3 Provision for credit losses 2 N/M N/M ◦ Partially offset by the divestiture of CenterSquare and Noninterest expense 697 (1) — the impact of net outflows Income before taxes $ 319 (16)% 11% Pre-tax operating margin 31% (380) bps 200 bps • Wealth Management, up 4% (a) (425) bps 205 bps Adjusted pre-tax operating margin – Non-GAAP 35% ◦ Higher equity market values Growth vs. ◦ Partially offset by lower net interest revenue Key Metrics ($ millions unless otherwise noted) 2Q18 1Q18 2Q17 Average loans $ 16,974 1% 3 % Average deposits $ 14,252 7% (4)% (b) Wealth Management client assets (in billions) $ 254 3% 6 % (c) Changes in AUM (in billions): 1Q18 2Q17 Beginning balance of AUM $ 1,868 $1,893 $1,727 Net (outflows) inflows: Equity (3) — (2) Fixed income (4) 7 2 Liability-driven investments (d) 2 13 15 Multi-asset and alternative investments (3) (3) 1 Index (7) (13) (13) Total long-term strategies (outflows) inflows (15) 4 3 Cash (11) (14) 11 Total net (outflows) inflows (26) (10) 14 Net market impact 17 (14) 1 Net currency impact (53) 29 29 Divestiture/Other (e) (1) (30) — Ending balance of AUM $ 1,805 $1,868 $1,771 Note: See page 13 for corresponding footnotes in Appendix. N/M - not meaningful; bps - basis points 6 Second Quarter 2018 – Financial Highlights

 
Other Segment 2Q18 1Q18 2Q17 Business Performance Drivers Financial Highlights ($ millions) year-over-year Fee revenue $ 40 $ 57 $ 113 • Fee revenue decreased primarily reflecting the lease- Net securities gains (losses) 1 (49) — related gains recorded in 2Q17 and lower income from Total fee and other revenue 41 8 113 corporate/bank-owned life insurance Net interest (expense) (35) (1) (22) • Net interest expense increased primarily resulting from Total revenue 6 7 91 corporate treasury activity Provision for credit losses (6) — (4) Noninterest expense 81 87 28 • Noninterest expense increase was impacted by (Loss) income before taxes $ (69) $ (80) $ 67 investments in technology and expenses associated with the continued consolidation of our real estate 7 Second Quarter 2018 – Financial Highlights

 
Capital and Liquidity June 30, 2018 March 31, 2018 Dec. 31, 2017 Consolidated regulatory capital ratios: (a) fully phased-in (b) Advanced Approach: CET1 ratio 11.0% 10.7% 10.3% Tier 1 capital ratio 13.1 12.7 12.3 Total capital ratio 13.9 13.4 13.0 Tier 1 leverage ratio 6.7 6.5 6.4 Supplementary leverage ratio ("SLR") 6.2 5.9 5.9 Average liquidity coverage ratio ("LCR") 118% 116% 118% Book value per common share (c) $ 37.97 $ 37.78 $ 37.21 Tangible book value per common share – Non-GAAP (c) $ 19.00 $ 18.78 $ 18.24 Cash dividends per common share $ 0.24 $ 0.24 $ 0.24 Common dividend payout ratio 23% 22% 22% Closing stock price per common share $ 53.93 $ 51.53 $ 53.86 Market capitalization (in millions) $ 53,927 $ 52,080 $ 54,584 Common shares outstanding (in thousands) 999,945 1,010,676 1,013,442 Note: See page 13 for corresponding footnotes in Appendix. 8 Second Quarter 2018 – Financial Highlights

 
Net Interest Revenue Growth vs. 2Q18 1Q18 2Q17 Financial Performance Drivers ($ in millions) year-over-year Net interest revenue $ 916 —% 11% • Net interest revenue up 11% Add: Tax equivalent adjustment 5 N/M N/M ◦ Higher interest rates Net interest revenue (FTE) – Non-GAAP (a) $ 921 —% 10% Net interest margin 1.26% 4 bps 12 bps • NIM up 12 bps to 1.26% Net interest margin (FTE) – Non-GAAP (a) 1.26% 3 bps 10 bps Selected average balances: Cash/interbank investments $113,475 (6)% 2% Trading account securities 3,784 (10) 54 Securities 117,761 (1) — Loans 57,066 (3) (3) Interest-earning assets 292,086 (3) 1 Interest-bearing deposits 152,799 (2) 7 Federal funds purchased and securities sold under repurchase agreements 18,146 (4) 1 Long-term debt 28,349 — 3 Other interest-bearing liabilities 23,815 — (6) Interest-bearing liabilities 223,109 (2) 5 Noninterest-bearing deposits 64,768 (9) (12) Note: See page 13 for corresponding footnotes in Appendix. FTE – fully taxable equivalent; N/M – not meaningful; bps – basis points 9 Second Quarter 2018 – Financial Highlights

 
Noninterest Expense Growth vs. Financial Performance Drivers ($ in millions) 2Q18 1Q18 2Q17 year-over-year Staff $ 1,489 (6)% 4% • Noninterest expense up 3% Professional, legal and other purchased services 328 13 3 ◦ Investments in technology, which impacted staff, professional, legal and Software and equipment 266 14 15 other purchased services and software Net occupancy 156 12 11 and equipment expenses Sub-custodian and clearing 110 (8) 2 ◦ Unfavorable impact of a weaker U.S. Distribution and servicing 106 — 2 dollar and expenses associated with Business development 62 22 (2) the continued consolidation of our real estate Bank assessment charges 47 (10) (20) • Estimated cost of relocating corporate Amortization of intangible assets 48 (2) (9) headquarters of $75 million Other 135 11 (7) ◦ $12 million was recorded in 2Q18 and Total noninterest expense $ 2,747 —% 3% expect remainder in 4Q18 10 Second Quarter 2018 – Financial Highlights

 
Fee and Other Revenue Growth vs. ($ in millions) 2Q18 1Q18 2Q17 Investment services fees: Asset servicing $ 1,097 (1)% 6% Securities lending 60 9 25 Clearing services 392 (5) (1) Issuer services 266 2 10 Treasury services 140 1 — Total investment services fees 1,955 (1) 5 Investment management and performance fees 910 (5) 4 Foreign exchange 171 (7) 13 Other trading revenue 16 N/M N/M Total foreign exchange and other trading revenue 187 (11) 13 Financing-related fees 53 2 — Distribution and servicing 34 (6) (17) Investment and other income 70 N/M N/M Total fee revenue 3,209 (3) 3 Net securities gains 1 N/M N/M Total fee and other revenue $ 3,210 (2)% 3% Note: N/M - not meaningful 11 Second Quarter 2018 – Financial Highlights

 
Appendix

 
Footnotes Second Quarter 2018 - Financial Highlights, Page 3 (a) Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense. (b) Regulatory capital ratios for June 30, 2018 are preliminary. For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under the U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced Approaches, which for each of the periods referenced was the advanced approach. (c) Quarterly results are annualized. Represents a Non-GAAP measure. See Appendix for a reconciliation. Investment Services Business Highlights, Page 5 (a) Current period is preliminary. Includes the AUC/A of CIBC Mellon Global Securities Services Company (“CIBC Mellon”), a joint venture with the Canadian Imperial Bank of Commerce, of $1.4 trillion at June 30, 2018, $1.3 trillion at March 31, 2018 and $1.2 trillion at June 30, 2017. (b) Represents the total amount of securities on loan in our agency securities lending program managed by the Investment Services business. Excludes securities for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, which totaled $70 billion at June 30, 2018, $73 billion at March 31, 2018 and $66 billion at June 30, 2017. Investment Management Business Highlights, Page 6 (a) Net of distribution and servicing expense. See corresponding Appendix pages for reconciliation of this Non-GAAP measure. In 1Q18, the adjusted pre-tax margin - Non-GAAP for prior periods was restated to include amortization of intangible assets and the provision for credit losses. (b) Current period is preliminary. Includes AUM and AUC/A in the Wealth Management business. (c) Current period is preliminary. Excludes securities lending cash management assets and assets managed in the Investment Services business. (d) Includes currency overlay AUM. (e) Primarily reflects a change in methodology beginning in 1Q18 to exclude AUM related to equity method investments as well as the CenterSquare divestiture. Capital and Liquidity, Page 8 (a) Regulatory capital ratios for June 30, 2018 are preliminary. For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under the U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced Approaches, which for the periods included was the Advanced Approaches. (b) On a transitional basis at Dec. 31, 2017, the CET1 ratio was 10.7%, the Tier 1 capital ratio was 12.7%, the Total capital ratio was 13.4%, the Tier 1 leverage ratio was 6.6% and the SLR was 6.1%. (c) Tangible book value per common share – Non-GAAP excludes goodwill and intangible assets, net of deferred tax liabilities. See corresponding Appendix pages for reconciliation of this Non-GAAP measure. Net Interest Revenue, Page 9 (a) Net interest revenue (FTE) – Non-GAAP and net interest margin (FTE) – Non-GAAP include the tax equivalent adjustments on tax-exempt income which allows for comparisons of amounts arising from both taxable and tax-exempt sources and is consistent with industry practice. The adjustment to an FTE basis has no impact on net income. 13 Second Quarter 2018 – Financial Highlights

 
Return on Common Equity and Tangible Common Equity Reconciliation ($ in millions) 2Q18 1Q18 2Q17 Net income applicable to common shareholders of The Bank of New York Mellon Corporation – GAAP $ 1,055 $ 1,135 $ 926 Add: Amortization of intangible assets 48 49 53 Less: Tax impact of amortization of intangible assets 11 12 19 Adjusted net income applicable to common shareholders of The Bank of New York Mellon Corporation excluding $ 1,092 $ 1,172 $ 960 amortization of intangible assets – Non-GAAP Average common shareholders’ equity $ 37,750 $ 37,593 $ 35,862 Less: Average goodwill 17,505 17,581 17,408 Average intangible assets 3,341 3,397 3,532 Add: Deferred tax liability – tax deductible goodwill (a) 1,054 1,042 1,542 Deferred tax liability – intangible assets (a) 709 716 1,095 Average tangible common shareholders’ equity – Non-GAAP $ 18,667 $ 18,373 $ 17,559 Return on common equity (annualized) – GAAP 11.2% 12.2% 10.4% Return on tangible common equity (annualized) – Non-GAAP 23.5% 25.9% 21.9% Book Value and Tangible Book Value Per Share Reconciliation ($ in millions, except common shares) June 30, 2018 March 31, 2018 Dec. 31, 2017 BNY Mellon shareholders’ equity at period end – GAAP $ 41,505 $ 41,728 $ 41,251 Less: Preferred stock 3,542 3,542 3,542 BNY Mellon common shareholders’ equity at period end – GAAP 37,963 38,186 37,709 Less: Goodwill 17,418 17,596 17,564 Intangible assets 3,308 3,370 3,411 Add: Deferred tax liability – tax deductible goodwill (a) 1,054 1,042 1,034 Deferred tax liability – intangible assets (a) 709 716 718 BNY Mellon tangible common shareholders’ equity at period end – Non-GAAP $ 19,000 $ 18,978 $ 18,486 Period-end common shares outstanding (in thousands) 999,945 1,010,676 1,013,442 Book value per common share – GAAP $ 37.97 $ 37.78 $ 37.21 Tangible book value per common share – Non-GAAP $ 19.00 $ 18.78 $ 18.24 (a) Deferred tax liabilities for 2Q17 are based on fully phased-in U.S. capital rules. 14 Second Quarter 2018 – Financial Highlights

 
Pre-tax Operating Margin Reconciliation - Investment Management Business 2Q18 1Q18 2Q17 ($ in millions) Income before income taxes – GAAP $ 319 $ 381 $ 288 Total revenue – GAAP $ 1,018 $ 1,088 $ 986 Less: Distribution and servicing expense 103 110 104 Adjusted total revenue, net of distribution and servicing expense – Non-GAAP $ 915 $ 978 $ 882 Pre-tax operating margin – GAAP (a) 31% 35% 29% Adjusted pre-tax operating margin, excluding distribution and servicing expense – Non-GAAP (a) 35% 39% 33% (a) Income before taxes divided by total revenue. 15 Second Quarter 2018 – Financial Highlights (a) Other charges include severance, litigation, an asset impairment and investment securities losses related to the sale of certain securities.