Record Asset Levels Help BNY Mellon Exceed Expectations

Bank of New York Mellon (NYS: BK) reported earnings for its third quarter this morning, and the New York trust bank had a decent quarter. Revenues were right in line with analysts' expectation at $3.6 billion, with EPS exceeding estimates by 13% at $0.61 per share. The bank was no doubt aided by record levels of assets under custody, but the low interest rate environment continues to be a drag on earnings.

What I was watching
In addition to the revenue and EPS numbers referenced above, I was also watching an improvement in its net interest margin. The custodial services that the bank provides for other financial institutions earn more money when interest rates are higher. For example, fellow trust bank Northern Trust (NAS: NTRS) cited the low interest rate environment for job cuts last year.

Unfortunately, net interest margin was down slightly from the previous quarter, though net interest revenue did increase from the previous quarter. The increase occurred primarily because of an increase in higher deposit levels, which helped overcome the elimination of interest on European Central Bank deposits.

What to expect going forward
With another $288 million completed of its share repurchase agreement, the bank still has $586 million remaining, which should help return some value to shareholders, regardless of any future dividend increases BNY. Either way, the bank was recently identified as one of the safest banks in the U.S. by Global Finance, and its unique business model makes it a favorite of Warren Buffet's Berkshire Hathaway (NYS: BRK.B) .

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