BNY Mellon's Pershing earnings rise in Q1 on incoming assets

Pershing rakes in $37 billion in assets, reaps record revenue

April 20, 2023 10:28 AM

Custodial giant Pershing's parent company, BNY Mellon, is exploring how to help the unit work more easily with its investment management arm.

After the bank disclosed its first-quarter earnings on April 18, BNY Mellon CEO Robin Vince cited the two segments as an example of his team's thinking after he took over the role last September. His comments came as Pershing reported record revenue and drew more than double the number of net new assets than the same time a year ago.

Pershing and the Investment Management unit "couldn't have been run more separately within the ecosystem of BNY Mellon," in the past, Vince said, according to a Thomson Reuters transcript.

"Investment Management was run as essentially almost a separate company off to the side," Vince said. "Pershing was run essentially as a different, separate company off to a different side, and we never really explored the opportunities to be able to think about the manufacturing of Investment Management with the fact that we have, across Pershing and [BNY Mellon] Wealth Management, a $2.5 trillion distribution base. Now we're an open-architecture firm. And so we aren't distributing all of our manufactured products into our distribution arms, but we have the opportunity to explore that which frankly hasn't been fully explored up until now."

To see the most interesting takeaways for financial advisors from Pershing and parent company BNY Mellon's earnings in the first quarter, scroll down the slideshow. For coverage of the firms' fourth-quarter earnings, click here. And to see where the companies stood through the third quarter of 2022, follow this link.

Note: The results include BNY Mellon-owned Pershing, which is the largest part of the firm's Market and Wealth Services segment, and those of the megabank's Investment and Wealth Management unit.

Pershing assets under custody or administration

The clearing and custodial giant's assets slipped by 4% year over year to $2.4 trillion in the first quarter due to the impact of slumping stock and bond values. On the plus side, average active clearing accounts rose 6% to 7.85 million, and net new assets more than doubled to $37 billion.

Vince described the inflow as a "healthy" figure for the firm. In BNY Mellon's last earnings call, the firm announced new custodial relationships with insurance firm State Farm, which has a registered investment advisory firm with nearly $11 billion in client assets, and a fintech startup called Arta Finance. The firm also receives new custodial assets when client firms make M&A deals that move accounts onto its platforms.

Representatives for the firm didn't immediately respond to a request to know what drove the inflows in the quarter.

Investment and Wealth Management client assets

The other wealth-related unit's total assets under management tumbled by 16% from the year-ago period to $1.91 trillion, based on lower asset values, negative effects from a stronger U.S. dollar and the spinoff last year of European credit and private debt manager Alcentra in a deal with Franklin Templeton.

Client assets managed by the wealth management segment dropped 9%, primarily from the lower stock and bond values.

Pershing revenue

Pershing's business reached a record as the company pulled back on its waivers for the previously low interest rates it had been paying in money market funds and raked in higher net interest revenue at the same time. Those gains easily offset lower levels of client transactions and falling asset values.

The custodian's revenue soared 22% year over year to $693 million in the first quarter. BNY Mellon's earnings statements don't break out Pershing's profits.

Investment and Wealth Management profits

BNY Mellon's wealth and asset management arms sustained deep losses to their profits in the first quarter because of the Alcentra spinoff, falling asset values and the rising strength of the U.S. dollar, according to the firm.

The unit generated pretax income of $93 million on revenue of $827 million. Profits dropped 56%, while revenue dropped by 14%.

Remark

An analyst asked Vince about the resilience of BNY Mellon, given the banking crisis. The firm has "not wanted to profit from the fact that there's been stress in the system," and it was one of the 11 banks shoring up First Republic with large deposits earlier this month, he noted.

"We are very cognizant of our role in the system and the responsibility that we have to the system given the role that we play, but, at the same time, over time, we do view this resiliency to be a strong commercial asset," Vince said, according to the Thomson Reuters transcript.

"We have these terrific individual components," he continued. "And, for us, bringing them together and actually being able to demonstrate to our clients the breadth of the platform with the resiliency that we offer, we think that's a winning combination and one that over time, as I've talked about before, we don't think we've taken full advantage of. So it is telling the story of who we are, our place in the world, the roles that we play and helping our clients to realize just the breadth of activity that they can actually do with us and the fact that they can trust and rely on us."