Bank of New York Mellon's BK operating EPS is closer to $0.53 after excluding the following: $17mm of M&I expenses, $6mm restructuring charge credit, $5mm of securities gains, $47mm of special litigation reserves, and slightly low tax rate. Jefferies notes that backing out ~$95mm of discount accretion equals a nickel of EPS.
Net interest income declined 4% Q-Q due to lower discount accretion and margin compression offsetting a larger balance sheet. Net interest margin compressed 5bp Q-Q primarily due to lower yields within the investment portfolio offsetting lower funding costs. Expenses declined 6% Q-Q despite $47mm of litigation expense within the other line. Business development and professional, legal & other, were the biggest improvements Q-Q.
Tier 1 common ratio rose 60bp to 12.4% and the tangible common equity ratio rose 10bp to 5.9% with help from a $129mm increase in unrealized gains. Earnings release does not speak to a Basel III adjusted ratio, but pay attention for management commentary on the earnings call for expectations on Tier 1 common ratio at year-end.
Jefferies has a $34 PT and Hold rating on BK
BK closed Monday at $29.20
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