The Bank of New York Mellon Corp.’s (BK) fourth-quarter earnings of 59 cents per share came in above the Zacks Consensus Estimate of 52 cents. The company saw an increase in assets under custody and administration during the quarter.
 
On Non-GAAP basis, total revenues for the quarter were $3.3 billion, down 1% sequentially and 20% year over year. Non-interest expense (Non-GAAP) increased 6% sequentially but declined 1% year over year to $2.3 billion.
 
Assets under management (excluding securities lending assets) totaled $1.12 trillion at December 31, 2009, up 15% sequentially and 20% compared to the prior-year quarter. The company attributed both the sequentially and year-over-year increases to the acquisition of Insight Investment Management in the fourth quarter of 2009.
 
Assets under custody and administration totaled $22.3 trillion at December 31, 2009, up 1% sequentially and 10% year-over-year. The year-over-year increase reflects higher market values and new business wins. The sequential increase primarily reflects higher market values. Asset and wealth-management fees in the quarter were $736 million, up 13% sequentially and 5% compared to last year.
 
The provision for credit losses decreased substantially to $65 million from $147 million in the prior quarter. The sequential decrease in provision was due to lower number of downgrades in the fourth quarter of 2009. During the reported quarter, total allowance for credit losses increased $32 million and net charge-offs totaled $33 million. Non-performing assets declined 2% sequentially to $550 million.
 
Formed following the merger of Bank of New York Company and Mellon Financial Corporation in Jul 2007, Bank of New York Mellon has the most diverse business mix among the trust banks.
 
We think that BNY Mellon is well-positioned to benefit from the growth of global financial assets, supported by the increasing savings levels, the modernization of public-pension schemes, and growth in cross-border investing. Also, in terms of credit quality, the company maintains a better profile than most of its banking peers, with minimum exposure to consumer or construction loans. However, we expect interest-bearing deposit costs to rise at a faster rate than asset yields due to competitive pressure, thereby negatively impacting net interest margin as well as net interest income.
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