October 17, 2012 / 10:42 AM / 8 years ago

BNY Mellon profit rises on money management fees

A BNY Mellon sign is seen on their headquarters in New York's financial district, January 19, 2011. REUTERS/Brendan McDermid

(Reuters) - BNY Mellon Corp (BK.N) reported an 11 percent rise in third-quarter earnings on Wednesday, beating analysts’ expectations, as money management and performance fees increased.

Investment management and performance fees rose 7 percent to $779 million from year-earlier levels as the world’s largest custody bank booked $9 billion of long-term inflows into stock and bond funds in the third quarter. BNY Mellon shares rose 1.9 percent to $24 in light premarket trading.

Total assets under management increased 13 percent to a record $1.4 trillion.

Net income was $720 million, or 61 cents a share, including a benefit of 4 cents per share from a lower-than-expected effective tax rate. That compared with $651 million, or 53 cents a share, a year earlier.

Analysts on average expected a profit of 54 cents a share, according to Thomson Reuters I/B/E/S.

Total fee revenue was nearly flat at $2.88 billion, hurt by a 45 percent decline in foreign exchange revenue. Rival State Street Corp’s (STT.N) third-quarter foreign exchange revenue dropped 44 percent to $115 million from $204 million a year earlier.

Both custody banks have been fighting lawsuits from customers and U.S. authorities accusing them of overcharging on certain forex trades. While the banks deny any wrongdoing, they concede that customers have shifted some of their forex activity to cheaper alternatives.

BNY Mellon’s assets under custody and administration totaled $27.9 trillion, up 3 percent from the second quarter and 8 percent from a year earlier. The increases reflect higher market values and winning new business.

Net interest revenue - largely the difference between what the bank pays on deposits and earns on loans and investments - was $754 million, down 3 percent from the year-ago period. Net interest margin was 1.2 percent on lower investment yields and the elimination of interest on European Central Bank deposits.

Reporting by Tim McLaughlin in Boston; Editing by Lisa Von Ahn and Jeffrey Benkoe

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