Safe and Sound

The Bank of New York Mellon

New York, NY
4
Star Rating
The Bank of New York Mellon is a New York, NY-based, FDIC-insured bank that opened its doors in 1851. As of December 31, 2017, the bank had equity of $26.98 billion on assets of $297.31 billion.

Thanks to the work of 41,577 full-time employees in 9 offices in multiple states, the bank currently holds loans and leases worth $29.36 billion, including real estate loans of $4.13 billion. U.S. bank customers currently have $127.90 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The Bank of New York Mellon exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three key criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and affords protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an an institution's financial resilience, capital is essential. When looking at safety and soundness, the higher the capital, the better.

The Bank of New York Mellon received a score of 4 out of a possible 30 points on our test to measure capital adequacy, lower than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Bank of New York Mellon's Tier 1 capital ratio was 14.14 percent, exceeding the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, The Bank of New York Mellon held equity amounting to 8.96 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid mortgages.

Having extensive holdings of these types of assets suggests a bank may eventually have to use capital to absorb losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, decreasing earnings and elevating the risk of a future failure.

The Bank of New York Mellon exceeded the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.29 percent of The Bank of New York Mellon's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on The Bank of New York Mellon's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or use them to address problematic loans, potentially making the bank better prepared to withstand financial shocks. Losses, on the other hand, reduce a bank's ability to do those things.

The Bank of New York Mellon scored 18 out of a possible 30 on Bankrate's earnings test, exceeding the national average of 15.12.

One key way to measure a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. The Bank of New York Mellon's most recent annualized quarterly return on equity was 9.81 percent, above the national average of 8.10 percent.

The bank reported net income of $2.50 billion on total equity of $26.98 billion for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.91 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.