BNY Mellon cutting staff and exploring sale of corporate trust business

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Bank of New York Mellon on Tuesday said it was undergoing a round of layoffs and at the same time exploring the possibility of selling its corporate trust business.

The company declined to say how many jobs were being cut. But chief financial officer Thomas Gibbons told analysts during a presentation in New York that severance costs would result in a charge against earnings of between $80 million and $100 million in the second quarter.

He said the move would save the company about $100 million annually.

Spokesman Ron Gruendl said the staff reductions were being made throughout the corporation and would be achieved through a combination of attrition and layoffs and by reconsidering proposed new hires.

He declined to say if more cuts were planned for later in the year.

“It’s a challenging environment for the industry in general, as well as for some of our businesses,” Mr. Gruendl said. “We are taking these actions to ensure that our staffing levels are sized appropriately.”

BNY Mellon currently has about 1,000 job openings corporatewide, including “a few hundred” in Pittsburgh, he said. The company, which has some 50,000 employees worldwide including about 7,600 in Pittsburgh, will review whether the openings should be filled, Mr. Gruendl said.

During Tuesday’s presentation, CEO Gerald Hassell told analysts that BNY Mellon was committed to “aggressive expense management” in the face of a lackluster economy and low interest rates.

The New York-based trust, custody and asset management giant reported profits of $2 billion in 2013, down about 16 percent from the previous year. The company earned $661 million in the first quarter this year vs. a loss of $266 million in the same three months last year.

Mr. Gibbons said the process of exploring a sale of the corporate trust unit was expected to conclude in the third quarter. The business employs about 3,500 in 61 offices worldwide, including about 135 people in Pittsburgh. It performs a variety of administrative duties for corporate and government debt issues, such as payment processing and collections.

BNY Mellon has been under pressure from the investment community to consider selling the corporate trust unit, whose profits have been on the decline. Speculation has been swirling in recent weeks that the company was shopping the unit.

Mr. Gibbons said the long-term outlook for corporate trust was “quite positive,” but that BNY Mellon would look at whether it was worth significantly more to another firm. “If yes, we may pursue a sale. If no, we will retain it.”

He didn’t say how much the company might expect to get for the business.

Mr. Hassell said the unit was worth “substantially more than the number floated in the press.” News reports have pegged the sales price at around $2.5 billion.

Revenue for the corporate trust unit is reported as part of BNY Mellon’s issuer services business, which had revenue of nearly $1.1 billion in 2013. Overall, the company posted revenue of $14.9 billion last year.


Patricia Sabatini: psabatini@post-gazette.com or 412-263-3066. First Published May 20, 2014 10:57 AM

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