BNY Mellon Restructures Investment Debt, Posts $2bn Loss
The Bank of New York Mellon Corp. (BK) lost a net $2.44bn, or $2.04 per common share, in Q309, compared with a net profit of $267m in the previous quarter and $303m in the year-ago quarter. The heavy losses are due to an investment debt restructuring effort this quarter. The bank sold or restructured $12bn in high-risk investment securities, including the sale of $3.6bn of the “lowest quality securities.” The bank also restructured $8.5bn of securities, and said there may be an opportunity to recover a portion of the loss over time. The impact of the sale and restructuring was a $4.8bn pre-tax charge ($3bn after tax) during the quarter. “Consistent with our ongoing strategy to reduce balance sheet risk, 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,” said BNY Mellon chairman and CEO Robert Kelly. “This restructuring does not materially impact capital, is expected to benefit net interest revenue by $125-$175m in 2010, and significantly reduces the risk of future securities losses.” BNY Mellon’s investment securities portfolio, which includes residential and commercial mortgage-backed securities (MBS), home equity lines of credit, credit cards and European floating-rate notes, improved $1.5bn from Q209, prompting the sale and restructuring. Before the restructure, the investment securities portfolio had a combined unrealized loss of $6.3bn, which narrowed through restructuring efforts to to $1.4bn. The provision for credit losses was $147m in Q309, up from $61m in Q209, due primarily to downgrades in the bank’s insurance and media portfolios. BNY Mellon said the provision is expected to decline in Q409. Total revenue declined 14% and total assets under management were $966bn, up 4% from Q209 but down 9% from a year earlier. Write to Austin Kilgore.