Bank of New York Mellon : 2024 Annual Report - Financial Section

Published: 2025-02-27 07:22:18 ET BK

FINANCIAL SECTION

THE BANK OF NEW YORK MELLON CORPORATION

2024 Annual Report

Table of Contents

Page

Financial Summary

Management's Discussion and Analysis of

Financial Condition and Results of Operations:

Results of Operations:

General

Overview

Summary of financial highlights

Fee and other revenue

Net interest income

Noninterest expense

Income taxes

Review of business segments

International operations

Critical accounting estimates

Consolidated balance sheet review

Liquidity and dividends

Capital

Trading activities and risk management

Asset/liability management

Risk Management

Cybersecurity

Supervision and Regulation

Risk Factors

Recent Accounting Developments

114

Supplemental Information (unaudited):

Explanation of GAAP and Non-GAAP financial

measures (unaudited)

115

Rate/volume analysis (unaudited)

119

Forward-looking Statements

120

Glossary

123

Report of Management on Internal Control Over

124

Financial Reporting

Report of Independent Registered Public

125

Accounting Firm

Page

Financial Statements:

127

Consolidated Income Statement

Consolidated Comprehensive Income Statement

129

Consolidated Balance Sheet

130

Consolidated Statement of Cash Flows

131

Consolidated Statement of Changes in Equity

132

Notes to Consolidated Financial Statements:

Note 1 - Summary of significant accounting and

reporting policies

135

Note 2 - Accounting changes and new accounting

guidance

147

Note 3 - Acquisitions and dispositions

148

Note 4 - Securities

149

Note 5 - Loans and asset quality

154

Note 6 - Leasing

160

Note 7 - Goodwill and intangible assets

161

Note 8 - Other assets

163

Note 9 - Deposits

164

Note 10 - Contract revenue

164

Note 11 - Net interest income

167

Note 12 - Income taxes

167

Note 13 - Long-term debt

169

Note 14 - Variable interest entities

169

Note 15 - Shareholders' equity

170

Note 16 - Other comprehensive income (loss)

174

Note 17 - Stock-based compensation

175

Note 18 - Employee benefit plans

176

Note 19 - Company financial information (Parent

Corporation)

182

Note 20 - Fair value measurement

185

Note 21 - Fair value option

192

Note 22 - Commitments and contingent liabilities

192

Note 23 - Derivative instruments

198

Note 24 - Business segments

204

Note 25 - International operations

208

Note 26 - Supplemental information to the

Consolidated Statement of Cash Flows

209

Report of Independent Registered Public

Accounting Firm

210

Directors, Executive Committee and Other

Executive Officers

215

Performance Graph

216

The Bank of New York Mellon Corporation (and its subsidiaries)

Financial Summary

(dollars in millions, except per share amounts and unless otherwise noted)

2024

2023

2022

Selected income statement information:

14,307

Fee and other revenue (a)

13,352

13,025

Net interest income

4,312

4,345

3,504

Total revenue (a)

18,619

17,697

16,529

Provision for credit losses

119

Noninterest expense

12,701

13,295

13,010

Income before income taxes (a)

5,848

4,283

3,480

Provision for income taxes

1,305

979

937

Net income (a)

4,543

3,304

2,543

Net (income) loss attributable to noncontrolling interests related to consolidated investment

(13)

(2)

management funds

Preferred stock dividends

(194)

(235)

(211)

Net income applicable to common shareholders of The Bank of New York

4,336

3,067

2,345

Mellon Corporation (a)

Earnings per share applicable to common shareholders of The Bank of New York

Mellon Corporation: (a)

5.84

Basic

3.91

2.89

Diluted

5.80

3.89

2.88

Average common shares and equivalents outstanding (in thousands):

742,588

Basic

784,069

811,068

Diluted

748,101

787,798

814,795

At Dec. 31

52.1

Assets under custody and/or administration ("AUC/A") (in trillions) (b)

47.8

44.3

Assets under management ("AUM") (in trillions) (c)

2.0

1.8

Selected ratios:

11.9%

Return on common equity (a)

8.6%

6.5%

Return on tangible common equity - Non-GAAP (a)(d)

22.8

16.8

13.4

Pre-tax operating margin (a)

Net interest margin

1.22

1.25

0.97

Cash dividends per common share

1.78

1.58

1.42

Common dividend payout ratio (a)

31%

41%

50%

Common dividend yield

2.3%

3.0%

3.1%

At Dec. 31

76.83

Closing stock price per common share

52.05

45.52

Market capitalization

55,139

39,524

36,800

Book value per common share (a)

51.52

47.97

44.25

Tangible book value per common share - Non-GAAP (a)(d)

27.05

25.25

22.96

Full-time employees (e)

51,800

53,400

51,700

Common shares outstanding (in thousands)

717,680

759,344

808,445

Regulatory capital ratios (f)

11.2%

Common Equity Tier 1 ("CET1") ratio

11.5%

11.1%

Tier 1 capital ratio

13.7

14.2

14.1

Total capital ratio

14.8

14.9

Tier 1 leverage ratio

5.7

6.0

5.7

Supplementary leverage ratio ("SLR")

6.5

7.3

6.8

2 BNY

Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations

General

In this Annual Report, references to "our," "we," "us," "BNY," the "Company" and similar terms refer to The Bank of New York Mellon Corporation and its consolidated subsidiaries. The term "Parent" refers to The Bank of New York Mellon Corporation but not its subsidiaries.

The following should be read in conjunction with the Consolidated Financial Statements included in this report. BNY's actual results of future operations may differ from those estimated or anticipated in certain forward-looking statements contained herein due to the factors described under the headings "Forward- looking Statements" and "Risk Factors," both of which investors should read.

Certain business terms used in this Annual Report are defined in the Glossary.

Fast Company's Best Workplaces for Innovators. Additional information is available on www.bny.com. Follow on LinkedIn or visit the BNY Newsroom for the latest company news.

BNY has three business segments, Securities Services, Market and Wealth Services and Investment and Wealth Management, which offer a comprehensive set of capabilities and deep expertise across the investment life cycle, enabling the Company to provide solutions to buy-side and sell- side market participants, as well as leading institutional and wealth management clients globally.

The diagram below presents our three business segments and lines of business, with the remaining operations in the Other segment.

The Bank of New

York Mellon

Corporation

This Annual Report generally discusses 2024 and 2023 items and comparisons between 2024 and 2023. Discussions of 2022 items and comparisons between 2023 and 2022 that are not included in this Annual Report can be found in our 2023 Annual Report, which was filed as an exhibit to our Form 10-K for the year ended Dec. 31, 2023.

Overview

BNY is a global financial services company that helps make money work for the world - managing it, moving it and keeping it safe. For more than 240

Securities

Services

Asset

Servicing

Issuer

Services

Market and Wealth

Services

Pershing

Treasury

Services

Clearance and

Collateral

Management

Investment and

Wealth Management

Investment

Management

Wealth

Management

years BNY has partnered alongside clients, putting its expertise and platforms to work to help them achieve their ambitions. Today BNY helps over 90% of Fortune 100 companies and nearly all the top 100 banks globally to access the money they need. BNY supports governments in funding local projects and works with over 90% of the top 100 pension plans to safeguard investments for millions of individuals, and so much more. As of Dec. 31, 2024, BNY oversees $52.1 trillion in assets under custody and/or administration and $2.0 trillion in assets under management.

BNY is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Headquartered in New York City, BNY employs over 50,000 people globally and has been named among Fortune's World's Most Admired Companies and

For additional information on our business segments, see "Review of business segments" and Note 24 of the Notes to Consolidated Financial Statements.

Summary of financial highlights

We reported net income applicable to common shareholders of $4.3 billion, or $5.80 per diluted common share, in 2024, including the negative impact of notable items. Notable items in 2024 include severance expense, litigation reserves and the net impact of adjustments for the Federal Deposit Insurance Corporation ("FDIC") special assessment. Excluding notable items, net income applicable to common shareholders was $4.5 billion (Non-GAAP), or $6.03 (Non-GAAP) per diluted common share, in 2024. In 2023, net income applicable to common shareholders was $3.1 billion, or $3.89 per diluted

BNY 3

Results of Operations (continued)

common share, including the negative impact of notable items. Notable items in 2023 include the initial estimate for the FDIC special assessment, severance expense, the reduction in the fair value of a contingent consideration receivable, litigation reserves and net losses on disposals. Excluding notable items, net income applicable to common shareholders was $4.0 billion (Non-GAAP), or $5.07 (Non-GAAP) per diluted common share, in 2023.

The highlights below are based on 2024 compared with 2023, unless otherwise noted.

See "Supplemental Information - Explanation of GAAP and Non-GAAP financial measures" beginning on page 115 for reconciliations of the Non- GAAP measures.

Metrics

Capital and liquidity

4 BNY

Results of Operations (continued)

Fee and other revenue

2024 vs.

2023 vs.

(dollars in millions, unless otherwise noted)

2024

2023

2022

2023

2022

Investment services fees

9,419

8,843

8,529

Investment management and performance fees (a)

3,139

3,058

3,299

(7)

Foreign exchange revenue

688

631

822

(23)

Financing-related fees

216

192

175

Distribution and servicing fees

158

148

130

Total fee revenue

13,620

12,872

12,955

(1)

Investment and other revenue (b)

687

480

N/M

Total fee and other revenue (b)

14,307

13,352

13,025

Fee revenue as a percentage of total revenue

73%

78%

AUC/A at period end (in trillions) (c)

52.1

47.8

44.3

AUM at period end (in billions) (d)

2,029

1,974

1,836

N/M - Not meaningful.

Fee revenue increased 6% compared with 2023, primarily reflecting higher investment services fees, investment management and performance fees and foreign exchange revenue.

Investment and other revenue increased $207 million in 2024 compared with 2023, primarily reflecting the reduction in the fair value of a contingent consideration receivable in 2023 and higher client activity in our fixed income and equity trading business.

Investment services fees

Investment services fees increased 7% compared with 2023, primarily reflecting higher market values, net new business and higher client activity.

AUC/A totaled $52.1 trillion at Dec. 31, 2024, an increase of 9% compared with Dec. 31, 2023, primarily reflecting higher market values, client inflows and net new business, partially offset by the unfavorable impact of a stronger U.S. dollar. AUC/A consisted of 37% equity securities and 63% fixed- income securities at Dec. 31, 2024 and 35% equity securities and 65% fixed-income securities at Dec. 31, 2023.

See "Securities Services business segment" and "Market and Wealth Services business segment" in "Review of business segments" for additional details.

Investment management and performance fees

Investment management and performance fees increased 3% compared with 2023, primarily reflecting higher market values, partially offset by the mix of AUM flows and lower performance fees. Performance fees were $51 million in 2024 and $81 million in 2023. On a constant currency basis (Non- GAAP), investment management and performance fees increased 2% compared with 2023. See "Supplemental Information - Explanation of GAAP and Non-GAAP financial measures" beginning on page 115 for the reconciliation of Non-GAAP measures.

AUM was $2.0 trillion at Dec. 31, 2024, an increase of 3% compared with Dec. 31, 2023, primarily reflecting higher market values, partially offset by the unfavorable impact of a stronger U.S. dollar.

See "Investment and Wealth Management business segment" in "Review of business segments" for additional details regarding the drivers of investment management and performance fees, AUM and AUM flows.

BNY 5

Results of Operations (continued)

Foreign exchange revenue

Foreign exchange revenue is primarily driven by the volume of client transactions and the spread realized on these transactions, both of which are impacted by market volatility, the impact of foreign currency hedging activities and foreign currency remeasurement gain (loss). In 2024, foreign exchange revenue increased 9% compared with 2023, primarily reflecting higher volumes. Foreign exchange revenue is primarily reported in the Securities Services business segment and, to a lesser extent, the Market and Wealth Services and Investment and Wealth Management business segments and the Other segment.

Financing-related fees

Financing-related fees, which are primarily reported in the Market and Wealth Services and Securities Services business segments, include capital market fees, loan commitment fees and credit-related fees. Financing-related fees increased 13% in 2024 compared with 2023, primarily reflecting higher underwriting fees.

Distribution and servicing fees

Distribution and servicing fees earned from mutual funds are primarily based on average assets in the funds and the sales of funds that we manage or administer, and are primarily reported in the Investment Management line of business. These fees, which include 12b-1 fees, fluctuate with the overall level of net sales, the relative mix of sales between share classes, the funds' market values and money market fee waivers.

Distribution and servicing fees were $158 million in 2024 compared with $148 million in 2023, driven by

higher money market balances. The impact of distribution and servicing fees on income in any one period is partially offset by distribution and servicing expense paid to other financial intermediaries to cover their costs for distribution and servicing of mutual funds. Distribution and servicing expense is recorded as noninterest expense on the income statement.

Investment and other revenue

Investment and other revenue includes income or loss from consolidated investment management funds, seed capital gains or losses, other trading revenue or loss, renewable energy investments gains or losses, income from corporate and bank-owned life insurance contracts, other investment gains or losses, gains or losses from disposals, expense reimbursements from our CIBC Mellon joint venture, other income or loss and net securities gains or losses. The income or loss from consolidated investment management funds should be considered together with the net income or loss attributable to noncontrolling interests, which reflects the portion of the consolidated funds for which we do not have an economic interest and is reflected below net income as a separate line item on the consolidated income statement. Other trading revenue or loss primarily includes the impact of market-risk hedging activity related to our seed capital investments in investment management funds, non-foreign currency derivative and fixed income trading, and other hedging activity. Other investment gains or losses includes fair value changes of non-readily marketable strategic equity, private equity and other investments. Expense reimbursements from our CIBC Mellon joint venture relate to expenses incurred by BNY on behalf of the CIBC Mellon joint venture. Other income includes various miscellaneous revenues.

6 BNY

Results of Operations (continued)

The following table provides the components of investment and other revenue.

Investment and other revenue

2024

(dollars in millions)

2023

2022

Income (loss) from consolidated investment management funds

(42)

Seed capital gains (losses) (a)

(37)

Other trading revenue

314

231

149

Renewable energy investment gains (losses) (b)

(12)

Corporate/bank-owned life insurance

137

118

128

Other investment gains (c)

159

Disposal (losses) gains

(6)

Expense reimbursements from joint venture

118

117

108

Other income (loss)

(46)

Net securities (losses)

(85)

(68)

(443) (d)

Total investment and other revenue (b)

687

480

Investment and other revenue was $687 million in 2024 compared with $480 million in 2023. The increase primarily reflects the reduction in the fair value of a contingent consideration receivable in 2023 and higher client activity in our fixed income and equity trading business.

BNY 7

Results of Operations (continued)

Net interest income

2024 vs.

2023 vs.

(dollars in millions)

2024

2023

2022

2023

2022

Net interest income

4,312

4,345

3,504

(1)%

24%

Add: Tax equivalent adjustment

N/M

Net interest income on a fully taxable equivalent ("FTE") basis - Non-

4,314

4,347

3,515

(1)%

24%

GAAP (a)

Average interest-earning assets

353,744

348,160

362,180

(4)%

Net interest margin

1.22%

1.25%

0.97%

(3) bps

28 bps

Net interest margin (FTE) - Non-GAAP (a)

1.22%

1.25%

0.97%

(3) bps

28 bps

N/M - Not meaningful. bps - basis points.

Net interest income decreased 1% compared with 2023, primarily reflecting changes in deposit mix, partially offset by higher investment securities portfolio yields and balance sheet growth.

Net interest margin decreased 3 basis points compared with 2023. The decrease primarily reflects the factors mentioned above.

Average interest-earning assets increased 2% compared with 2023. The increase primarily reflects higher federal funds sold and securities purchased under resale agreements, loan balances and securities, partially offset by lower interest-bearing deposits with the Federal Reserve and other central banks and interest-bearing deposits with banks.

Average non-U.S. dollar deposits comprised approximately 25% of our average total deposits in 2024 and 2023. Approximately 50% of the average non-U.S. dollar deposits in 2024 and 45% in 2023 were euro-denominated.

Net interest income in 2025 will largely depend on the level and mix of client deposits and investment securities portfolio reinvestment yields. Based on market implied forward interest rates as of Dec. 31, 2024, we expect net interest income for 2025 to increase when compared with 2024.

8 BNY

Results of Operations (continued)

Average balances and interest rates

2024

2023

(dollars in millions)

Average

Interest

Average

Interest

Average

balance

rate

balance

rate

Assets

Interest-earning assets:

Interest-bearing deposits with the Federal Reserve and other central banks:

59,432

3,148

5.30%

Domestic offices

59,492

3,085

5.19%

Foreign offices

40,554

1,467

3.62

44,412

1,456

3.28

Total interest-bearing deposits with the Federal Reserve and other central banks

99,986

4,615

4.62

103,904

4,541

4.37

Interest-bearing deposits with banks

10,991

434

3.94

13,620

523

3.84

Federal funds sold and securities purchased under resale agreements (a)

31,306

10,915

34.86

26,077

7,141

27.38

Loans:

63,108

4,107

6.51

Domestic offices

59,487

3,663

6.16

Foreign offices

5,033

287

5.70

4,609

253

5.49

Total loans (b)

68,141

4,394

6.45

64,096

3,916

6.11

Securities:

27,826

1,022

3.67

U.S. government obligations

33,434

1,021

3.05

U.S. government agency obligations

62,855

2,058

3.27

60,586

1,695

2.80

Other securities:

17,560

951

5.42

Domestic offices

17,168

803

4.68

Foreign offices

29,620

911

3.07

23,505

695

2.96

Total other securities

47,180

1,862

3.95

40,673

1,498

3.68

Total investment securities

137,861

4,942

3.58

134,693

4,214

3.13

Trading securities (primarily domestic) (c)

5,459

309

5.66

5,770

315

5.46

Total securities (c)

143,320

5,251

3.66

140,463

4,529

3.22

Total interest-earning assets (c)

353,744

25,609

7.24%

348,160

20,650

5.93%

Noninterest-earning assets

59,590

58,582

Total assets

413,334

406,742

Liabilities and equity

Interest-bearing liabilities:

Interest-bearing deposits:

141,279

5,791

4.10%

Domestic offices

123,513

4,703

3.81%

Foreign offices

92,926

2,856

3.07

88,829

2,421

2.73

Total interest-bearing deposits

234,205

8,647

3.69

212,342

7,124

3.35

Federal funds purchased and securities sold under repurchase agreements (a)

17,007

9,974

58.64

20,540

6,699

32.62

Trading liabilities

1,768

4.98

3,396

156

4.60

Other borrowed funds:

136

9.32

Domestic offices

676

6.49

Foreign offices

303

1.77

426

0.74

Total other borrowed funds

439

4.10

1,102

4.27

Commercial paper

1,197

5.18

4.81

Payables to customers and broker-dealers

12,726

640

5.03

14,449

566

3.91

Long-term debt

31,816

1,866

5.87

31,021

1,711

5.51

Total interest-bearing liabilities

299,158

21,295

7.12%

282,855

16,303

5.76%

Total noninterest-bearing deposits

49,521

59,227

Other noninterest-bearing liabilities

23,694

24,011

Total liabilities

372,373

366,093

Total The Bank of New York Mellon Corporation shareholders' equity

40,756

40,588

Noncontrolling interests

205

Total liabilities and equity

413,334

406,742

Net interest income (FTE) - Non-GAAP (c)(d)

4,314

1.22%

4,347

Net interest margin (FTE) - Non-GAAP (c)(d)

1.25%

Less: Tax equivalent adjustment

Net interest income - GAAP

4,312

1.22%

4,345

Net interest margin - GAAP

1.25%

Percentage of assets attributable to foreign offices

23%

24%

Percentage of liabilities attributable to foreign offices

28%

27%

BNY 9

Results of Operations (continued)

Average balances and interest rates

2022

(dollars in millions)

Average

Interest

Average

balance

rate

Assets

Interest-earning assets:

Interest-bearing deposits with the Federal Reserve and other central banks:

Domestic offices

46,270

810

1.75%

Foreign offices

51,172

209

0.41

Total interest-bearing deposits with the Federal Reserve and other central banks

97,442

1,019

1.05

Interest-bearing deposits with banks

16,826

221

1.31

Federal funds sold and securities purchased under resale agreements (a)

24,953

1,200

4.81

Loans:

Domestic offices

62,640

1,878

3.00

Foreign offices

5,185

121

2.33

Total loans (b)

67,825

1,999

2.95

Securities:

U.S. government obligations

40,583

607

1.49

U.S. government agency obligations

64,041

1,157

1.81

Other securities:

Domestic offices (c)

18,979

629

3.31

Foreign offices

26,283

154

0.59

Total other securities (c)

45,262

783

1.73

Total investment securities (c)

149,886

2,547

1.70

Trading securities (primarily domestic) (c)

5,248

143

2.73

Total securities (c)

155,134

2,690

1.73

Total interest-earning assets (c)

362,180

7,129

1.97%

Noninterest-earning assets

64,507

Total assets

426,687

Liabilities and equity

Interest-bearing liabilities:

Interest-bearing deposits:

Domestic offices

111,491

980

0.88%

Foreign offices

101,916

607

0.60

Total interest-bearing deposits

213,407

1,587

0.74

Federal funds purchased and securities sold under repurchase agreements (a)

12,940

934

7.21

Trading liabilities

3,432

1.98

Other borrowed funds:

Domestic offices

181

4.12

Foreign offices

324

0.51

Total other borrowed funds

505

1.80

Commercial paper

2.06

Payables to customers and broker-dealers

17,111

156

0.91

Long-term debt

27,448

860

3.13

Total interest-bearing liabilities

274,848

3,614

1.31%

Total noninterest-bearing deposits

85,652

Other noninterest-bearing liabilities

25,172

Total liabilities

385,672

Total The Bank of New York Mellon Corporation shareholders' equity

40,905

Noncontrolling interests

110

Total liabilities and equity

426,687

Net interest income (FTE) - Non-GAAP (c)(d)

3,515

Net interest margin (FTE) - Non-GAAP (c)(d)

0.97%

Less: Tax equivalent adjustment

Net interest income - GAAP

3,504

Net interest margin - GAAP

0.97%

Percentage of assets attributable to foreign offices

26%

Percentage of liabilities attributable to foreign offices

30%

10 BNY

Disclaimer

The Bank of New York Mellon Corporation published this content on February 27, 2025, and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on February 27, 2025 at 12:21:23.207.