DBRS: BNY Mellon Announces Higher Litigation Expense Adjustment to 4Q Results; Ratings Unaffected

DBRS, Inc. (DBRS) has today commented that The Bank of New York Mellon Corporation’s (BNY Mellon or the Company) announcement adjusting 4Q14 results lower reflecting an additional after-tax litigation expense of $598 million has no impact on its ratings, including the Company’s Issuer & Senior Debt rating of AA (low) with a Stable trend.

Indeed, despite the large charge, BNY Mellon remained profitable for the quarter with net income applicable to common shareholders of $209 million (previously was $807 million). Meanwhile, capital metrics were modestly lower as a result of lower earnings, but remain sound, especially on a risk-adjusted basis. Specifically, the Company’s estimated fully phased-in Basel III common equity Tier 1 ratio declined to 10.6% from 10.8% under the standardized approach. Moreover, it appears this tax litigation expense adjustment settles substantially all of the Company’s foreign exchange-related issues, which DBRS views favorably.

As a result of the anticipated settlements, BNY Mellon expects to report a significant decline in the aggregate range of reasonably possible losses for legal proceedings.

Note:
All figures are in U.S. dollars unless otherwise noted.