紐約梅隆銀行 (BK) 2002 Q1 法說會逐字稿

Welcome to the Bank of New York's first quarter earnings call. Today's speaker will be Bruce Van Saun, Chief Financial Officer of the Bank of New York. The information and materials contained in this recording and any related materials are owned or licensed by the Bank of New York Company, Inc. and may not be copied displayed, retransmitted, published...

For public or commercial purposes without the express written consent of the Bank of New York Company, Inc. and the relevant information provided. If you have a touch-tone phone, you can use your keypad to navigate through the call. If you would like to rewind approximately 30 seconds, please press seven. If you would like to pause, press eight. If you would like to resume, press eight again. If you would like to fast forward approximately 30 seconds, please press nine. Now, The Bank of New York's Chief Financial Officer, Bruce Van Saun.

van saun: Good morning. I'm Bruce Van Saun, Chief Financial Officer, and I welcome you to The Bank of New York Company's pre-recorded call. I'll offer some brief comments regarding our first quarter earnings, which we released this morning, April 17 in order to provide additional insight into our performance and strategy.

First some necessary housekeeping. Let me remind you that my remarks may include statements about future expectations, plans and prospects, which are forward-looking statements. Actual results may differ materially from those indicated or implied by the forward-looking statements as a result of various important factors including those identified in our 2001 10-K. Forward-looking statements in this call speak only as of April 17, 2002. We will not update forward-looking statements to reflect facts, assumptions, circumstances or events, which have changed after they were made.

Now I'd like to make some general remarks about the quarter. Overall, EPS of 50 cents was a penny below the consensus estimate and slightly below our own expectations. Unfortunately, the modest up tick in the broad capital markets we saw in the fourth quarter of 2001 relative to the third quarter, did not carry through the first quarter, negatively impacting revenue growth in our equity linked security servicing businesses and our foreign exchange area. This past quarter was characterized by a lack of investor confidence in the market that resulted from both widespread accounting related concerns, and unsettled political and economic conditions around the world. In addition, that interest income declined in the first quarter versus the fourth quarter for a variety of reasons, including advanced positioning for higher rates and continued calling of our loan portfolio. Not withstanding the challenging environment, there were several positive developments in the quarter as we continued to execute our long-term initiative. First, we were very pleased that our credit costs appear to have stabilized this quarter and we continue to make progress on our efforts to improve the risk profile of the corporate loan portfolio. Our fourth quarter decision to create an accelerated loan disposition program for

telecom credit has proven timely, as there has been subsequent deterioration in some of the credits that we sold. By March 31, commitments and related out-standings were down to 261 million and 60 million, compared to 445 million and 197 million at year end. We also reduced exposures to non-financial companies by over 1.5 billion in the first quarter, in line with our stated goal of 7 billion in exposure reductions for the year. This will - this will ultimately free up over 200 million in economic capital, which is being re-allocated to higher growth opportunities.

Secondly, we continue to fund our strategic investments, including the securities servicing applications development initiatives necessary to sustain our competitive advantage, as well as the capital expenditures required to restore and enhance our infrastructure in the aftermath of the WTC disaster. In order to protect its investment spending, we have aggressively controlled other expenses,

certain areas to the business environment through selective staff reductions during the quarter.

And lastly, we were also active on the acquisition front, announcing five transactions in the first quarter. Our expanding execution and clearing services platform, which we have highlighted at our analyst presentation, had four acquisitions this quarter, namely

, G-Trade, Weiss, Peck and Greer,

and Jaywalk. G-Trade is a particularly important acquisition for us, because it greatly expands our international execution capabilities, and area where we expect to see high growth. We also announced the Ganett, Welsh and Kotler transaction, and asset manager with over 5 billion in assets under management, princely focused on tax-exempt fixed income management with very good performance. We expect this deal to close in May.

With respect to an update on the World Trade Center disaster, our insurance claims process is proceeding efficiently at this point. We have segmented the claim into four major components and have presented estimated losses for three of the four categories. The last will be completed by the end of April. There is still a verification and negotiation process to take place, but we expect to receive an addition significant advance in the near future.

For the quarter we incurred 23 million of interim space related expected, arising from the WTC disaster. We believe these are covered by insurance and accordingly have booked an insurance receivable as an offset. Accumulative WTC related insurance recoveries we - we have recorded are now about 200 million. Further costs associated with the interim facilities and any losses on subleases will be treated similarly. We've developed a migration plan for returning to our 101 Barkley downtown facility. The reoccupation will begin later this quarter and is expected to be completed by the end of the third quarter. Our diversification plan includes moving some staff to other locations, including new space in the metropolitan area, as well as to our growth centers in Syracuse, New York and Orlando, Florida.

I'll now review some income statement and balance sheet categories in more detail. First, with respect to fee income, the level of security servicing revenues was up modestly versus the fourth quarter. Our equity linked businesses, particularly ADRs, execution services and clearing, did not meet expectations, reflecting the soft capital market environment. International custody, which is more heavily weighted to equities than domestic custody was also negatively impacted. Offsetting these negatives were strength in our fixed income and money marked linked businesses, including corporate trusts, global equity services and domestic custody. We also had a modest partial quarter impact from the

and G-Trade acquisitions. The private client services and asset management business had a good first quarter with sequential quarter revenue growth exceeding 6 percent. Positive factors this quarter were the impact of higher market valuations on fees, growth in short-term money market products and a continued interest in alternative investment products.

has over 5.7 billion in assets under management, up from 2.4 billion when we acquired it in November 2000.

Several other key categories were soft in the first quarter including foreign exchange in other trading, loan syndication and trade finance. Each of these activities was impacted by lower market volatility and volume. Overall fee revenues for the quarter were essentially flat with the fourth quarter, after adjusting for the insurance recovery in the fourth quarter and the planned lower level of securities gained.

Net interest income on a tax equivalent basis declined 27 million on a sequential quarter basis. Let me provide you with some color. First, we took some actions in the fourth quarter in anticipation of a rising rate environment, which cost us some near-term income, but will enhance our benefits as rates move higher.

Second, the full effect of hitting floor pricing on core retail deposits itself, a large portion of which are interest free. The

based corporate loan

continued to price down at rollover dates, creating some spread compression.

Next, the levels of broker-dealer and other client activities were higher in the fourth quarter than in the first quarter, reflecting both a slower capital markets environment and some post 911 related activity that was present in the fourth quarter.

And lastly, our continued efforts to call the corporate loan portfolio lowered loan fees in both commitments and outstanding. We are clearing committed to the steps we outlined in our analyst meeting to improve our risk profile, even if there are modestly adverse near-term consequences.

Not withstanding the decrease in net interest income in the first quarter, given our inherent asset liability profile, we expect to see net interest income increase as interest rates rise and capital market activity rebounds.

A provision for credit losses came in at 35 million, matching charge offs. Credit quality in the core banking portfolio appears stable to slightly improving in terms of internal risk scores. We continue to proactively manage the portfolio and use the secondary market to exit higher risk names and manage exposures.

Turning to expenses, excluding a reduced goodwill amortization benefit from

, we were effectively flat with the prior quarter, not withstanding acquisitions during the quarter in higher technology spending. As mentioned, we aggressively controlled discretionary expenses, especially in the areas of staffing and related costs.

With respect to our balance sheet, the quarter and balance sheet sides of 76.8 billion is about 3 billion lighter than year end, reflecting lower market activity levels and our continued calling of the loan portfolio. Our capital ratios are all strong and within our target ranges. In addition to the acquisitions, we purchased another 5 million shares under and accelerated share repurchase program during the quarter and our quarter end share count was 730 million. We have 6 million shares still authorized to buy under our 16 million share authorization.

To sum up, we remain very confident in the operating leverage that we have in our business model, but full year earnings will be impacted by the lower starting point in the first quarter and the strength and pace of the recovery. In the meantime, we continue to manage expenses carefully and enhance our long-term competitive position through our technology investments, business line acquisitions and risk reduction efforts.

That concluded my comments today. We will be presenting next week at UBS Warburg's financial conference, which will be Webcast. If you have any further questions, please contact our head of investor relations, John Roy. Thank you for listening.

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