BNY Mellon, BankUnited Earnings See Huge Gains Despite Challenges

Bank of New York Mellon (BNY Mellon) saw profits rise substantially in the fourth quarter of 2015 and for the year, despite a residential mortgage-backed securities (RMBS) lawsuit filed by the Federal Deposit Insurance Corp., in August 2015, according to the bank's earnings statement for the quarter.

Although BNY Mellon's earnings fell quarter-to-quarter from $820 million, or $0.74 per diluted common share in the third quarter of 2015 to $637 million, or $0.57 per share in the fourth quarter, year-over-year earnings are way up from $209 million, or $0.18 per diluted common share in the fourth quarter of 2014.

Even with geopolitical instability, emerging market weakness, higher regulatory compliance requirements and low interest rates, we executed on our strategic priorities and focused on what was within our control. -Gerald L. Hassell, Chairman and CEO of BNY Mellon

For the 2015 year, BNY Mellon earned $3.1 billion, or $2.71 per diluted common share in net income, compared to the 2014 total of $2.5 billion, or $2.15 per diluted common share. Total revenue for the bank is up 1 percent at $3.7 billion, the statement said.

BNY Mellon Chairman and CEO Gerald L. Hassell said the 2015 results "demonstrated that our strategic plan has positioned us well to perform in all operating environments. Even with geopolitical instability, emerging market weakness, higher regulatory compliance requirements and low interest rates, we executed on our strategic priorities and focused on what was within our control."

He added, "We also generated strong positive operating leverage, mainly through our intense focus on our business improvement process, which is creating operating efficiencies for our clients and savings for our shareholders. As we look ahead to 2016, enhancing the client experience continues to be a priority, as we seek to strengthen service quality and productivity by leveraging our investments in industry-leading technologies."

BNY Mellon had a tough quarter in the area of RMBS litigation during the third quarter. The FDIC sued BNY Mellon in August, 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 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.

BankUnited, who recently confirmed that it will discontinue retail mortgage originations as of January 15, 2015 due to a "lack of scale," still managed to have a profitable fourth quarter, according to its earnings statement.

The company reported net income of $56.3 million, or $0.52 per diluted share for the fourth quarter of 2015, compared to $46.8 million, or $0.45 per diluted share for the fourth quarter of 2014.

For the 2015 year, BankUnited's net income totaled $251.7 million, or $2.35 per diluted share. The prior year, the bank's net income reached $204.2 million, or $1.95 per diluted share.

“Despite the challenging banking environment, BankUnited had an outstanding quarter with respect to earnings and growth in loans and deposits.” -John Kanas, Chairman, President and CEO of BankUnited 

Total loans at the bank, including premiums, discounts, and deferred fees and costs, rose to $16.6 billion at for the quarter from $12.4 billion last year during the same quarter. The bank stated that much of their loan growth stemmed from the commercial portfolio segment. New residential loans were stagnant at the bank at $2.9 billion during the fourth quarter of 2015. Single family residential and home equity loans made up 18.4 percent of total loans in the fourth quarter of 2015, down from 22.2 percent the prior year.

"BankUnited has made the decision to exit the retail mortgage origination business due to a lack of scale, said Mary Harris, SVP of Marketing and Public Relations. "We are committed to honoring all of our loan commitments made to our customers and will get those loan closed in a timely and orderly fashion. We are also fully committed to all of our other mortgage banking businesses: mortgage warehousing, lending, servicing, and corresponding business.

Click here to view Bank of New York Mellon's Earnings Statement.

Click here to view BankUnited's Earnings Statement.