Custody and Collateral Fees Boosts BNY Mellon’s Improved Second Quarter

BNY Mellon reported an 8% increase in net revenue to $779 million during the second quarter of this year, as it reported an increase in fees from custodian and collateral services.

Total revenue in the quarter was $3.9 billion, up 4% year-on-year. Of which investment services fees grew 4% to $1.785 billion, largely due to its Global Collateral Services and Asset Servicing division, BNY Mellon says in an earnings release.

It saw a 6% increase in fees from clearing services to $347 million, while securities lending revenue increased 7% to $49 million.

Financing-related fees was up $14 million, driven by higher fees related to secured intraday credit provider to dealers in connection with their tri-party repo activity, the custodian says. Average tri-party repo balances increased 8% to $2.174 trillion.

Furthermore, assets under custody (AuC) increased by $1 billion to $28.6 trillion. BNY Mellon also estimates to receive an additional $1 trillion in AuC due from new business wins.

“The investments we are making in strategic technology platforms and applications are helping our solutions resonate with clients, contributing to our ability to capture new business including a significant middle-office contract to service more than $770 billion in assets for a prominent investment manager,” says Gerald L. Hassell, chairman and CEO, BNY Mellon in a statement.

During the quarter, BNY Mellon won a portfolio and fund accounting mandate for T. Rowe Price, making it the largest middle-office asset manager for BNY Mellon. It also launched a new Private Equity and Real Estate Fund Services unit as it looks to meet demand from investment managers using alternative strategies.

“We are going to be driving a strategy to drive more end-to-end solutions for investment managers and alternative investment managers, and I think it will be a positive driver of our long-term results,” adds Brian Shea, CEO of BNY Mellon Investment Services, speaking on an earnings call.

Shea also added BNY Mellon is seeing additional clients in its third-party broker-dealer clearing business, following the exit of J.P. Morgan at the end of last year.

“We are certainly benefiting from J.P. Morgan’s decision to exit and we are attracting quite a number of those clients to our platform, some of which we’ll be converting, quite a few of which we’ll be converting to our platform in the third quarter,” adds Shea.