Why Bank of New York Mellon Corp (NYSE: BK) stock is under pressure

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Bank of New York Mellon Corp (NYSE: BK) stock lost over 6.9% on 15th July, 2020 (as of 12:23 pm GMT-4 ; Source: Google finance) post disappointing second quarter 2020 performance, as compared to its peers. The group’s Asset Servicing revenue and Pershing revenues fell 4% and 11% during the second quarter of 2020 as compared to the first quarter of 2020. Asset Servicing revenues was hurt by foreign exchange and other trading revenue and net interest revenue. Pershing segment was hurt by rate-driven money market fee waivers, a one-time fee recorded in 1Q20 and lower clearing volumes, despite better money market fund balances. Noninterest expense rose 1%yoy on the back of ongoing investments in technology, which offset lower business development and staff expenses.

Investment Management business was also hurt during the quarter on the back of unfavorable change in the mix of AUM since 2Q19 coupled with the impact of money market fee waivers, despite equity investment gains (net of hedges), including seed capital. Wealth Management fell 5% and 9% as compared to the first quarter of 2020 and second quarter of 2019.

The firm boosted its capital position with CET1 ratio rising 12.6% or improving 125 bps in 2Q20.  They also enhanced CET1 capital to $1.57 billion while Tier 1 capital improved to $2.55 billion, including issuance of $1 billion of preferred stock. The group Paid $278 million in dividends to common shareholders. The ROE and ROTCE reached 9% and 19%. CET1 ratio and Tier 1 leverage ratio reached 12.6% and 6.2% respectively.

The group’s Provision for credit losses reached $143 million due to ongoing challenging macroeconomic outlook. Assets under custody and/or administration rose 5% to $37.3 trillion, driven by rising client inflows, market values and net new business. AUM rose 6% yoy to $2.0 trillion, driven by better market values and net inflows, which partially offset by the unfavorable impact of a stronger U.S. dollar.

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