BNY Mellon defends against pension suits
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Bank of New York Mellon Wednesday reported profits in the third quarter rose 5 percent, to $651 million from $622 million in the same period last year, as the company's new CEO defended currency trading practices under attack in numerous lawsuits.
Per-share profits rose 4 percent, to 53 cents from 51 cents, matching the consensus estimate on Wall Street.
The New York-based asset management and securities servicing giant saw its quarterly revenue climb 8 percent to $3.69 billion, as fee income grew 9 percent and net interest income rose 8 percent.
"We achieved revenue and earnings growth as we benefited from new business wins, net long-term asset flows and increased deposits," Chairman and CEO Gerald Hassell said in his first quarterly earnings release since replacing Robert Kelly at the helm on Aug. 31. The company has said Mr. Kelly stepped down because of differences with the board, but has declined to elaborate.
Mr. Hassell, a veteran of Bank of New York which merged with Pittsburgh's Mellon Financial in 2007, noted that the company's profits rose despite higher legal and severance costs.
BNY Mellon is facing numerous lawsuits alleging that it overcharged and misled pension funds while executing foreign currency trades for them. Among the complaints were those filed early this month by New York's attorney general and the U.S. Attorney in Manhattan seeking more than $2 billion.
Mr. Hassell reiterated to analysts Wednesday that the lawsuits were "unwarranted and flat-out wrong on the facts and the law."
BNY Mellon "will not be coerced into paying huge sums for no wrongdoing," he said, adding that the legal actions so far had not hurt business.
"We haven't seen any attrition in clients certainly over the [foreign exchange] matter," he said in an early morning conference call.
Mr. Hassell said the "overwhelming majority" of customers "like the service and they know it provides them vastly better pricing than they could get anywhere else for what are essentially retail size trades."
Last week, a BNY Mellon currency trader in Pittsburgh was identified by the Wall Street Journal as having worked as a mole for the last two years for law enforcement officials investigating the matter. The man, who left BNY Mellon this year, provided information and documents, the Journal said, citing sources familiar with the matter.
During Wednesday's conference call, Mr. Hassell said BNY Mellon would be unveiling details of cost-cutting and other initiatives at an investors conference on Nov. 14.
In August, the company announced plans to cut about 1,500 jobs corporatewide.
A hiring freeze and natural attrition are expected to minimize layoffs, the company has said.
Spokeswoman Lane Cigna Wednesday declined to say how the jobs reduction plan would affect Pittsburgh.
BNY Mellon employed 7,760 in the region at the end of the third quarter, mostly Downtown, up 60 from the end of the second quarter and an increase of 241 since the beginning of the year, Ms. Cigna said.
BNY Mellon shares dropped 1.16 percent, or 23 cents, in trading Wednesday to close at $19.54.
First Published October 20, 2011 12:00 am