BNY beats Q3 profit estimates as assets under custody and administration top $50 trillion

10:10 am Friday, October 11th, 2024

By Niket Nishant and Manya Saini

(Reuters) -BNY beat third-quarter profit estimates on Friday, boosted by higher investment services fees as assets under its custody and administration exceeded the $50 trillion mark for the first time.

The bank’s fees, typically calculated as a percentage of the assets under custody, benefited from a market rally that boosted their value as well as acquisition of new clients.

Economic resilience and expectations of an interest rate cut cycle, which began in the final month of the quarter, prompted clients to keep up their investment activities and bolstered BNY’s bottom line.

“We recognize that there have been a lot of shifts in the macroeconomic outlook since the beginning of the year,” CEO Robin Vince said in a call with reporters.

“We see the market backdrop as pretty constructive but there are a lot of risks and uncertainties and so for us its always the business of preparing for what exists, helping our customers to be able to navigate.”

The world’s largest custodian bank’s shares were last up 1.4% in premarket trading.

Net interest income (NII) – the spread between earnings from assets and costs on liabilities – also jumped 3% as yields from BNY’s bond investments offset the impact of higher deposit costs. Analysts had expected a 1.3% drop in NII, according to estimates compiled by LSEG.

The bank reported adjusted profit of $1.52 per share, beating Wall Street expectations of $1.42.

Assets under custody and administration were $52.1 trillion, 14% higher than last year.

SECURITIES BUSINESS SHINES

Total fee revenue grew 5% from a year earlier to $3.40 billion. Asset servicing – the unit responsible for safekeeping and settlement of trades – fetched 5% higher revenue.

Meanwhile, issuer services, which caters to clients issuing securities, saw a 1% jump.

As a crucial intermediary in the financial system, the 240-year-old bank’s results are significant because they often reflect broader market trends.

So far this year, BNY’s shares have gained 43% while peers State Street and Northern Trust are up 15% and 8%, respectively.

(Reporting by Niket Nishant and Manya Saini in Bengaluru; Editing by Krishna Chandra Eluri)