BNY Mellon takes $88M hit from Russia exit

Bank of New York Mellon took a first-quarter earnings hit from its Russia withdrawal, and the custody banking giant predicted that the negative financial impacts will continue.

The New York-based company reported fee revenue of $3.1 billion, down 3% from a year ago, due to $88 million in losses largely from sanctions against Russia and lost depository receipt services for Russian companies.

The firm’s exit from Russia is expected to result in $15 million to $20 million in lost revenue each quarter going forward, BNY Mellon executives said during an earnings call Monday. That estimated range was slightly lower than what the company predicted last month.

Bank of New York Mellon reported net income of $765 million during the first quarter, which was down 18% year-over-year from the same period a year earlier. The company’s earnings per share were compressed by eight cents as a result of the fallout from its Russia exit.

Gabriela Bhaskar/Bloomberg

Russia’s invasion of Ukraine is one of several factors posing challenges to BNY Mellon, which is in the process of transitioning to new CEO Robin Vince.

“Now we’re in an increasingly uncertain environment, including the war in Ukraine, volatile markets and persistently higher inflation, which will require more meaningful monetary policy adjustments,” outgoing CEO Todd Gibbons said during the call.

In March, BNY Mellon said it had “ceased new banking business in Russia and suspended investment management purchases of Russian securities,” joining a cadre of other Wall Street firms abandoning business in the country.

At the time, the company said it would likely lose approximately $100 million in first-quarter revenue, plus another $80 million to $100 million in annual revenue going forward.

During the first quarter, net income at BNY Mellon declined 18% year-over-year to $765 million. The company reported earnings per share of 86 cents, which was compressed by eight cents as a result of the fallout from the company’s Russia exit, but still narrowly beat an 85-cent consensus estimate.

Securities issuer services fees fell 43% from the same period last year. The bank also added $17 million to its provision for credit losses in connection with risks stemming from interest-bearing deposits at Russian banks. Russia’s banking industry has been targeted by Western sanctions.

Vince, who is currently BNY Mellon’s president and takes over as CEO at the end of August, isn’t new to the firm. He has most recently led its global market infrastructure division.

On the call Monday with analysts, he said the company’s market and wealth services business, which includes the recently launched Pershing X digital advisory offer, has been a particular focus during the CEO transition.

Vince also described a focus on real-time payments for the company’s treasury services business. Going forward, he said that improving operating leverage — or the rate of increasing revenue after expenses — will be a high priority.

BNY Mellon reported a 353 basis-point decline in operating leverage from the end of last year, but it is expecting to deliver positive operating leverage by the end of the year, even with the impact of its exit from Russia.

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