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BNY Mellon Posts Positive Financial Results in Q3 Despite RMBS Litigation Difficulties

money-four [1]The Bank of New York Mellon Corporation [2] reported a net income of $820 million for the third quarter of 2015, an increase of 16 percent year-over-year on an adjusted basis, according to the bank’s Q3 2015 earnings statement [3] released on Tuesday.

The increase in net income during Q3 made it a positive quarter for the bank despite a lawsuit filed by the FDIC in August accusing the bank of breaching its duties as a bond trustee for $2 billion in residential mortgage-backed securities and despite having their own lawsuit against JPMorgan Chase over toxic RMBS dismissed.

BNY Mellon’s net income for Q3 last year was $734 million, adjusted for the gains of sales on the bank’s investment of Wing Hang Bank Limited and the One Wall Street Building, net of litigation and restructuring charges. Though the bank’s net income was up year-over-year in Q3 2015, it dropped slightly from Q2’s adjusted net income of $868 million.

“Our third quarter results reflect our focus on delivering significant value to our shareholders in all market environments,” said Gerald L. Hassell, chairman and CEO of BNY Mellon. “We are executing on our strategic priorities, which helped us to generate more than 370 basis points of positive operating leverage year-over-year and to remain on track to achieve the three-year targets we shared on Investor Day a year ago. We are enhancing our risk management and regulatory compliance practices, investing in technology platforms for the future and have onboarded employees associated with two strategic relationships while simultaneously controlling expenses.”

“Our third quarter results reflect our focus on delivering significant value to our shareholders in all market environments.”

—Gerald Hassell

The bank’s total revenue of $3.8 billion for Q3 was an increase of 1 percent year-over-year on an adjusted basis. Nonperforming residential mortgage loans declined for BNY Mellon in Q3 2015 to $103 million, down from $110 million in Q2 2015 and from $113 million in Q3 2014. The bank returned more than $875 million to shareholders in the form of share repurchases and dividends, according to the announcement.

BNY Mellon had a tough quarter in the area of RMBS litigation during Q3. The FDIC sued BNY Mellon in August [4], claiming the bank breached its duties as bond trustee for $2.06 billion worth of residential mortgage-backed securities purchased by an FDIC-insured bank in Texas which later failed. In September, a New York Supreme Court judge dismissed a $600 million suit [5] filed by BNY Mellon against JPMorgan Chase and a unit of General Electric Capital over $1.275 billion worth of toxic residential mortgage-backed securities. In that suit, BNY Mellon accused JPMorgan of misrepresenting the quality of loans packaged in an RMBS trust for which BNY acted as securities administrator; the judge ruled that the case was time-barred.