A buying spree at Bank of New York Mellon Corp. boosted money management and servicing fees, and helped the trust bank return to profitability in the third quarter.
Assets under management surged 18 percent to $1.14 trillion, driven in part by BNY Mellon's July acquisition of PNC's Global Investment Servicing for $2.3 billion, and a $343 million European deal in August to acquire BHF Asset Servicing GmbH.
Chairman and CEO Robert P. Kelly said the acquisitions helped offset weakness in capital markets, with assets under custody and administration climbing 10 percent to $24.4 trillion, driven by new business as well as higher market values.
"Our newly combined capabilities position us to bid for and win pieces of business that we never would have won previously," Kelly told analysts Tuesday on a conference call, noting that both acquisitions added to the company's earnings.
The New York bank reported net income of $622 million, or 51 cents per share, in the three months ended Sept. 30. That contrasts with a net loss of $2.46 billion, or $2.05 per share, a year earlier. That loss was related to a charge for restructuring the company's investment securities portfolio.
Analysts surveyed by Thomson Reuters, whose estimates usually take out one-time items, predicted earnings of 54 cents per share, on average.
BNY Mellon's revenue rose 3 percent to $3.43 billion from $3.33 billion, which beat Wall Street's $3.39 billion forecast.
Total adjusted fee revenue rose to $2.71 billion from $2.61 billion last year. Net interest revenue, or earnings from deposits and loans, rose to $718 million from $716 million.
The trust bank's provision for credit losses was a credit of $22 million compared with a charge of $147 million in the 2009 quarter due to the current quarter's 26 percent decline in criticized assets, which are loans that are classified just above non-performing loans.
The unrealized gain on the investment securities portfolio was $319 million, up sharply from $114 million in the second quarter on declining interest rates and the tightening of credit spreads.
BNY Mellon's results were weighed down by a decline in foreign exchange and other trading revenue, to $146 million from $246 million in the same quarter a year ago. Declining interest rates and lower volatility hurt trading activity in the latest quarter.
Last quarter's acquisitions as well the acquisition of British pension fund manager Insight Investment Management in last year's fourth quarter contributed to a nearly 13 percent increase in total non-interest expenses, which rose to $2.61 billion from $2.31 billion.
With the acquisitions, BNY Mellon's employee total rose to 47,700 from 42,000 a year ago.
The deals also have given BNY Mellon's business a more international flavor. The company generated 51 percent of its revenue from outside the U.S. last quarter, up from 42 percent in the year-ago quarter.
BNY Mellon on Tuesday also declared a quarterly dividend of 9 cents per common share, payable Nov. 9 to shareholders of record as of Oct. 29.
Shares of Bank of New York Mellon fell along with the broader market, losing 63 cents to $25.99.
Jewell reported from Boston.