BNY Mellon profit dips following forex woes

City A.M. Reporter
BANK of New York Mellon yesterday said its first-quarter profit declined slightly while its foreign exchange revenue slid 21 per cent and legal expenses surged as it battled clients’ claims of overcharging on currency trades.

BNY Mellon’s forex business has been the subject of several lawsuits in which the bank has been accused of overcharging pension fund clients on certain trades. The bank has denied any wrongdoing, but it is paying out considerable sums to defend its position in courtrooms across the country.

The bank’s litigation and legal expenses have weighed on results. Those expenses climbed by $70m (£44m) from year-ago levels.

BNY Mellon chief financial officer Todd Gibbons said the bank is operating in a “very litigious state” because of the fallout from the credit crisis.

The world’s largest custody bank reported net income of $619m, or 52 cents a share, compared with $625m, or 50 cents a share, a year earlier. That matched the average estimates of analysts.

Nomura bank analyst Glenn Schorr said: “Importantly, expenses were controlled, though we would like to see more.”

BNY Mellon said foreign exchange revenue totaled $136m in the first quarter, a decline of 21 per cent from the year-ago period and a 26 per cent drop from the fourth quarter. The bank blamed lower volumes and less market volatility .

Assets under custody and administration, a key driver of fees, totaled $26.6 trillion at the end of March, 4 percent higher than the year-ago period.

The bank’s total fee revenue, which includes forex, service fees and investment management fees, dropped 1 percent to $2.8 billion.

Net interest revenue, meanwhile, surged 10 per cent to $765m as average client deposits increased $28bn, or 73 per cent, from the year-ago period. But since the end of the fourth quarter, those deposits have declined $10bn, or 13 per cent, as clients put more cash to work.