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Record Asset Levels Help BNY Mellon Exceed Expectations

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Bank of New York Mellon (NYSE: BK  ) reported earnings for its third quarter this morning, and the New York trust bank had a decent quarter. Revenues were right in line with analysts' expectation at $3.6 billion, with EPS exceeding estimates by 13% at $0.61 per share. The bank was no doubt aided by record levels of assets under custody, but the low interest rate environment continues to be a drag on earnings.

What I was watching
In addition to the revenue and EPS numbers referenced above, I was also watching an improvement in its net interest margin. The custodial services that the bank provides for other financial institutions earn more money when interest rates are higher. For example, fellow trust bank Northern Trust (Nasdaq: NTRS  ) cited the low interest rate environment for job cuts last year.

Unfortunately, net interest margin was down slightly from the previous quarter, though net interest revenue did increase from the previous quarter. The increase occurred primarily because of an increase in higher deposit levels, which helped overcome the elimination of interest on European Central Bank deposits.

What to expect going forward
With another $288 million completed of its share repurchase agreement, the bank still has $586 million remaining, which should help return some value to shareholders, regardless of any future dividend increases BNY. Either way, the bank was recently identified as one of the safest banks in the U.S. by Global Finance, and its unique business model makes it a favorite of Warren Buffet's Berkshire Hathaway (NYSE: BRK-B  ) .

Speaking of Warren Buffett, there is another regional bank that would be an option for him if he was a smaller investor. This small, under-the-radar bank has been called one of The Stocks Only the Smartest Investors Are Buying. You can learn about it, and more, in our exclusive free report. Just click here to keep reading.

Robert Eberhard owns shares of Berkshire Hathaway. Follow him on Twitter, or click here to see his holdings and a short bio. The Motley Fool owns shares of Berkshire Hathaway. Motley Fool newsletter services recommend Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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