Mellon Financial Corporation reported net income from continuing operations of $203 million, or 49 cents per share, in the second quarter of 2005.
Driving the net income increase, total fee and other revenue was up 11 percent to $898 million and represented 87 percent of total revenue, with acquisitions accounting for 4 percent of this increase. The overall increase was primarily driven by a $56 million increase in investment management fees and a $26 million increase in institutional trust and custody fees.
Institutional trust and custody fee revenue in the second quarter of 2005, including securities lending revenue, increased 17 percent to a record level of $181 million. The increase reflects higher securities lending revenue, the benefit of net new business, improved market conditions and the first quarter acquisition of DPM, a hedge fund administrator. Institutional trust and custody revenue grew by 8% (unannualized) compared to the first quarter of 2005, Mellon said in the release.
Assets under management increased 9 percent to a record level of $738 billion at June 30, 2005. Assets under administration or custody increased 20 percent to a record level of $3.428 trillion at June 30, 2005. Assets under management increased 1 percent (unannualized) and assets under administration or custody increased 4 percent (unannualized) compared to March 31, 2005.
“Second-quarter results reflect strong growth in our fee-based businesses, principally Asset Management and Asset Servicing. Institutional Asset Management benefited from strong new business generation and continued excellent investment performance, a combination that has also resulted in a higher level of performance fees. Asset Servicing continued to benefit from strong organic growth as well as seasonally strong market-related activity. During the quarter we were recognized by another independent survey as the leading global custodian among our large global custodian peers. We continued to generate industry-leading returns on equity of 20 percent, and utilized our excess capital to reinvest in our growth businesses and repurchase shares,” said Martin G. McGuinn, chairman and chief executive officer of Mellon Financial Corporation.
In comparison, net income from continuing operations of $180 million, or 42 cents per share was recorded in the second quarter of 2004, and $305 million, or 72 cents per share, in the first quarter of 2005. The second quarter of 2004 included a charge of $24 million, or 4 cents per share, and the first quarter of 2005 included gains, net of other charges, of $182 million, or 28 cents per share, each of which is detailed in a supplemental table of this release.
Also in the second quarter of 2005, Mellon completed the sale of its human resources (HR) consulting practices, benefits administration and business process outsourcing businesses. In the first quarter of 2005, discontinued operations accounting was applied for these businesses. The loss from discontinued operations totaled $78 million, or 19 cents per share, in the second quarter of 2005, compared with $4 million, or less than 1 cent per share, in the second quarter of 2004, and $50 million, or 12 cents per share, in the first quarter of 2005. Net income totaled $125 million, or 30 cents per share, in the second quarter of 2005, compared with $176 million, or 42 cents per share, in the second quarter of 2004, and $255 million, or 60 cents per share, in the first quarter of 2005.
Mellon declared its quarterly common stock dividend of 20 cents per share. This cash dividend is payable on Monday, Aug. 15, 2005, to shareholders of record at the close of business on Friday, July 29, 2005.