Excluding this charge, net income applicable to common shareholders was $588 million and earnings per diluted common share was $0.50. This compares with income of $619 million, or $0.52 per diluted common share, in the first quarter of 2012 and income of $622 million, or $0.53 per diluted common share, in the fourth quarter of 2012.
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"We remain focused on our key priorities: investing in our businesses to drive organic growth and sustainable shareholder value; controlling discretionary expenses; maintaining a strong balance sheet and returning capital to shareholders," said Gerald L. Hassell, chairman and chief executive officer of BNY Mellon.
"We are pleased to report our fourteenth consecutive quarter of net long-term asset management flows, and continued growth in investment services fees," added Mr. Hassell. "Investments in our Investment Management, Global Collateral Services and Global Markets businesses have positioned us well for future growth, and we remain on track to deliver the savings from our operational excellence initiatives."
"Finally, the earnings power and strength of our business model allowed us to announce a capital plan that includes share repurchases of up to $1.35 billion, a 16% increase from the prior year’s board authorization, and a 15% increase in the quarterly dividend to 15 cents per share beginning in the second quarter," concluded Mr. Hassell.
Assets under custody and/or administration ("AUC/A") amounted to $26.3 trillion at March 31, 2013, an increase of 2% compared with the prior year and unchanged sequentially. The year-over-year increase was driven by net new business and improved market values, partially offset by the impact of changes in foreign currency rates. Sequentially, improved market values were offset by the impact of changes in foreign currency rates, while net new business was flat. Assets under management ("AUM") amounted to a record $1.4 trillion at March 31, 2013, an increase of 9% compared with the prior year and 3% sequentially. Both increases primarily resulted from net new business and higher market values. Long-term inflows totaled a record $40 billion and short-term outflows totaled $13 billion for the first quarter of 2013. Long-term inflows benefited from liability-driven investments as well as equity and fixed income funds.
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By GlobalData? Investment services fees totaled $1.7 billion, an increase of 1% year-over-year and 4% sequentially. Both increases were primarily driven by higher asset servicing revenue as a result of increased activity with existing clients and improved market values. The year-over-year increase also reflects higher treasury and clearing services revenue, partially offset by lower issuer services and securities lending revenue. The sequential increase also reflects higher issuer and clearing services revenue.
? Investment management and performance fees were $822 million, an increase of 10% year-over-year and a decrease of 4% sequentially. The year-over-year increase was impacted by the acquisition of the remaining 50% interest in Meriten Investment Management ("Meriten"). Excluding the Meriten acquisition, investment management and performance fees increased 9% year-over-year driven by higher market values, net new business and lower money market fee waivers. The sequential decrease reflects seasonally lower performance fees and higher money market fee waivers, partially offset by higher market values. Comparisons to both prior periods were negatively impacted by the stronger U.S. dollar.
? Foreign exchange and other trading revenue totaled $161 million compared with $191 million in the first quarter of 2012 and $139 million in the fourth quarter of 2012. In the first quarter of 2013, foreign exchange revenue totaled $149 million, an increase of 10% year-over-year and 41% sequentially. The year-over-year increase primarily reflects higher volumes, partially offset by a decrease in volatility, while the sequential increase primarily reflects increased volatility and higher volumes. Other trading revenue was $12 million in the first quarter of 2013 compared with $55 million in first quarter of 2012 and $33 million in the fourth quarter of 2012. Other trading revenue was lower principally due to losses on interest rate hedges and lower fixed income and equity trading.
? Investment and other income totaled $72 million compared with $139 million in the first quarter of 2012 and $116 million in the fourth quarter of 2012. Both decreases reflect lower leasing gains and lower foreign currency remeasurement. Additionally, the year-over-year decrease includes lower seed capital gains and the sequential decrease includes lower net gains on loans held for sale retained from a previously divested bank subsidiary.
? Net interest revenue and the net interest margin (FTE) were $719 million and 1.11% compared with $765 million and 1.32% in the first quarter of 2012 and $725 million and 1.09% in the fourth quarter of 2012. The year-over-year decrease in net interest revenue was primarily driven by lower accretion, lower yields on the reinvestment of securities and the elimination of interest on European Central Bank deposits, partially offset by a change in the mix of earning assets and higher average interest-earning assets driven by higher deposit levels. The sequential decrease primarily reflects a lower number of days in the first quarter of 2013.
The decrease in net interest margin (FTE) compared with the first quarter of 2012 primarily reflects higher average interest-earning assets driven by higher deposits levels, lower reinvestment yields, lower accretion and the elimination of interest on European Central Bank deposits.
? The net unrealized pre-tax gain on our total investment securities portfolio was $2.2 billion at March 31, 2013 compared with $2.4 billion at Dec. 31, 2012. The decrease in the net unrealized pre-tax gain was primarily driven by an increase in market interest rates and $48 million of net realized securities gains in the first quarter of 2013. The low rate environment creates the opportunity for us to realize gains as we rebalance and manage the duration risk of the investment securities portfolio. Gains realized on these sales should be considered along with net interest revenue when evaluating our overall results. In the first quarter of 2013, combined net interest revenue and net securities gains totaled $767 million, compared with $805 million in the first quarter of 2012 and $775 million in the fourth quarter of 2012.
The provision for credit losses was a credit of $24 million in the first quarter of 2013. Approximately half of the credit was driven by a broad improvement in the credit quality of the loan portfolio and half related to a reduction in our qualitative allowance. The provision for credit losses was $5 million in the first quarter of 2012 and a credit of $61 million in the fourth quarter of 2012.
