Pensions hit Bank of New York profits

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Pensions hit Bank of New York profits

By Amy Yee in New York

Financial Times Published: April 16 2003

The Bank of New York on Wednesday said its first-quarter earnings had fallen 19 per cent due to weak economic conditions and higher expenses from revising employee pensions.

The company announced net income of $295m, or 41 cents a share, compared with $362m, or 50 cents a share, last year. However first-quarter profits rose from fourth quarter 2002 earnings when the group booked a charge of $230m against its exposure to United Airlines and increased bad loan provisions.

"The business environment this quarter has been more difficult and uncertain than expected as a result of ongoing geopolitical developments," said Thomas Renyi, chairman and chief executive, in a statement.

Despite the decline in first-quarter earnings, analysts were heartened by the results in light of profits on Tuesday from rivals State Street, which reported a 46 per cent plunge in net income, and Northern Trust, down 26 per cent.

Earnings dynamics were pretty good [at BONY] in contrast to State Street and Northern,? said Brock Vandervliet, analyst at Lehman Brothers. [BONY's] revenues did well. I was encouraged by their results despite being a penny less than estimates.?

The bank reported higher non-interest expenses of $739m compared with $648m last year due to revised pension assumptions and the expensing of stock options. Expenses from salaries and employee benefits totalled $423m compared with $388m a year ago.

Net interest income also fell to $395m from $425m in 2002. The company attributed the decline to the impact of Federal Reserve interest rate reductions, higher non-performing loans and lower yields on fixed income securities.

The Bank of New York reaffirmed its acquisition of Capital Resources Financial Services, a Chicago-based firm, as announced in the first quarter. The company said it is on schedule to close its $2bn acquisition of Pershing, the clearing services unit of Credit Suisse First Boston, on May 1.