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The Bank of New York Mellon Reports Fourth Quarter Continuing EPS of $.61 Excluding Merger and Integration Expenses Continuing EPS of $.67
Results include write-down of CDOs in investment portfolio of $118 million after-tax, or 10 cents per share
Proactively consolidated off-balance sheet conduit, resulting in an extraordinary after-tax charge of $180 million, or 16 cents per share - improves profitability of the portfolio, conduit asset quality strong
Excellent revenue momentum, substantial operating leverage and integration on track
Capital ratios remain strong
The Bank of New York Mellon Corporation (NYSE: BK) reported fourth quarter income from continuing operations, before extraordinary items, of $700 million and diluted earnings per share of 61 cents, which compares to 60 cents a year ago and 56 cents sequentially. Income from continuing operations was $642 million in the third quarter of 2007, and $427 million in the fourth quarter of 2006.
Adjusting for the impact of merger and integration expense ($124 million pre-tax), diluted earnings per share for the fourth quarter of 2007 were 67 cents, which compares to 61 cents a year ago and 67 cents sequentially. The results of continuing operations for the fourth quarter of 2007 include 10 cents per share for the CDO write-down.
"I am pleased with our accomplishments in 2007. We began to successfully merge our two legacy companies and posted terrific fourth quarter results with 17% revenue and 26% earnings per share growth, excluding the CDO write-down. We are fully delivering on our commitments to clients, shareholders, and employees and business momentum remains strong. Our fourth quarter results also include the relative impact of recent market volatility on a small portion of our investment securities portfolio as well as our proactive decision to consolidate a bank-sponsored conduit. These actions are consistent with our strategy of aggressively reducing risk and complexity while exiting those businesses that do not support our global growth opportunities in asset management and securities servicing," said Robert P. Kelly, chief executive officer of The Bank of New York Mellon.
Net income totaled $520 million, or 45 cents per share, in the fourth quarter of 2007, compared with $1.625 billion or $2.27 per share in the fourth quarter of 2006. The fourth quarter of 2007 included an extraordinary charge of $180 million, net of tax, associated with management's decision to restructure and consolidate the assets of the bank-sponsored conduit, Three Rivers Funding Corporation (TRFC). This decision was based on the ongoing disruption in the capital markets impacting the funding costs of conduits which is in sharp contrast to the current level of our own funding costs, together with our continuing efforts to exit non-core activities. The extraordinary loss reflects the impact of a negative mark to market associated with spread widening on the assets consolidated. The securities within this portfolio have strong investment grade ratings and there were no downgrades of TRFC's assets during the fourth quarter. We expect to earn back the mark to market loss over the remaining lives of the assets (which average approximately 4-5 years), based on the credit quality of the assets. Further discussion of the assets consolidated and the related financial impact is provided on page 9.
Income from continuing operations, before extraordinary loss, for the full-year 2007 totaled $2.227 billion, or $2.38 per share, compared with $1.476 billion, or $2.04 per share, in 2006. Adjusting for the impact of merger and integration expense ($404 million pre-tax), and non-operating items detailed on page 11, diluted earnings per share for full-year 2007 were $2.62, compared with $2.14 for full-year 2006. Adjusting for the impact of merger and integration expenses ($404 million pre-tax), intangible amortization ($319 million pre-tax) and non-operating items, diluted earnings per share for full- year 2007 were $2.83 which compares with $2.22 for full-year 2006. Net income for the full-year 2007 totaled $2.039 billion, or $2.18 per share, compared with $2.847 billion, or $3.94 per share, for full-year 2006. Discontinued operations for the fourth quarter and full-year 2006 included a net after-tax gain of $1.217 billion from the sale of our Retail Business.
The Bank of New York Mellon Corporation is a global financial services company focused on helping clients manage and service their financial assets, operating in 34 countries and serving more than 100 markets. The company is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team. It has more than $20 trillion in assets under custody and administration, more than $1.1 trillion in assets under management and services $11 trillion in outstanding debt.
Additional information is available at www.bnymellon.com.