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Stock of the Day
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Bank of New York Mellon Corp. (BK)
Bank of New York Mellon Corp. Posts Heavy Loss on Mortgage Securities Problem
"It ain't over ‘til it's over." That's what Yogi would have said about Bank of New York Mellon Corp. (BK: Charts, News, Offers) and its most recent third quarter $2.46 billion net loss, or $2.05 a share, compares to $303 million profit last year. While we are seeing signs of economic improvement in many places, BNY Mellon is not quite done with the crisis yet and took a hefty charge in the third quarter to restructure its investment portfolio by selling and writing down the value of its lowest quality securities. Was the team at BNY Mellon sleeping behind the wheel and just woke up to reality? Or was it a lion waiting to pounce when the opportunity presented itself?
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BNY Mellon is the world's largest custody bank, who primarily provides asset and wealth management services for institutions, corporations, and high-net-worth individuals. The bulk of its revenue comes from fees for managing money for these investors. Because BNY Mellon is not a traditional retail bank, it has little direct exposure to risky consumer loans and mortgages that resulted in the recent economic meltdown. But like others, it has taken hits on its investments in securities backed by residential mortgages and other real estate-related loans as the value of those distressed assets have plummeted.
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According to the Chairman and CEO, Robert P. Kelly, the company didn't jump in on the rush to sell heavily distressed mortgage-backed securities at the fire-sale prices. "We took advantage of the recent strength in the fixed income markets by selling or recognizing losses on a significant portion of our investment securities portfolio," Kelly said. "This restructuring does not materially impact capital, is expected to benefit net interest revenue by $125 million to $175 million in 2010 and significantly reduces the risk of future securities losses." He said the move was consistent with BNY Mellon's ongoing strategy to reduce balance sheet risk. So it appears that this delayed reaction from BNY Mellon is an intentional move to minimize losses and reduce risk.
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Although BNY Mellon announced a net loss of $2.05 a share, the bank said it earned 54 cents per share on an adjusted basis, excluding investment securities losses and other special one-time items, beating analysts' estimates. Additionally, fee revenue has improved over the past three quarters as market conditions improve. In the most recent quarter, the total fee revenue was $2.62 billion, up 4 percent from the previous quarter. Part of the fees BNY Mellon collects is based on the performance of the assets it manages -- as the market continues to improve, the fee revenue will also improve. Overall, it appears that the bank is well-position to take advantage of the economic and stock market recovery.
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Other Stuff Related to BNY Mellon:
Bank of N.Y. Mellon's net beats after charges; shares rise -- Shares of BNY Mello rose in early trade after the company said its third quarter net income after charges topped analyst's expectations.
The Bank of New York Mellon Q3: Beats Amid Charges -- Despite heavy loss, BNY Mellon's earning of 54 cents per share beats Zacks Consensus Estimate of 47 cents by a wide margin.
Bank of New York 'Got Message,' Posts Q3 Loss -- BNY Mellon listed to investors' concerns and shed $12.1 billion in risky investments.
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More Stocks in the News:
Investors lap up Apple's 47 percent profit jump -- Apple (AAPL: Charts, News, Offers) can do no wrong as the results for the most recent quarter blew past expectations.
Coca-Cola Profit Little Changed as China Volume Rises -- Coca-Cola's (KO: Charts, News, Offers) third quarter profit rose less than 1 percent as gains in Mexico and China were countered by the decline at home.
Invesco's third-quarter profit sinks -- Invesco (IVZ: Charts, News, Offers) impacted by foreign exchange rates, third quarter revenue dropped 14/7 percent to $705.8 million.
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Profile |
Click here to view a detailed profile of Bank of New York Mellon Corp..
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