"I am pleased with the meaningful progress we made in improving our capital position and reducing operating expenses. Our Basel III Tier 1 common equity ratio was 7.1% at the end of the quarter, and we continued to generate strong returns on tangible common equity. It was a challenging revenue quarter, as general uncertainty in the financial markets resulted in lower-than-normal levels of client activity. Our results were also impacted by seasonality in our Depositary Receipts business. We remained focused on driving our operational excellence initiatives and managing our expense base lower to offset weak market conditions," said Gerald L. Hassell, chairman, president and chief executive officer of BNY Mellon.

"I want to thank our 49,000 professionals across the company for their continued commitment to improve our results and help our clients succeed in a difficult global economy," said Mr. Hassell.

Net income applicable to common shareholders totaled $2.516 billion, or $2.03 per common share, for the full-year 2011 compared with $2.518 billion, or $2.05 per common share, for the full-year 2010.

Assets under custody and administration amounted to $25.8 trillion at Dec. 31, 2011, an increase of 3% compared with the prior year and flat sequentially. The increase compared with Dec. 31, 2010 was driven by net new business. Assets under management, excluding securities lending assets, amounted to $1.26 trillion at Dec. 31, 2011. This represents an increase of 8% compared with the prior year and 5% sequentially. The year-over-year increase primarily reflects net new business. On a sequential basis, the increase resulted from higher equity markets and net new business. Long-term inflows totaled $16 billion and short-term inflows totaled $7 billion. Long-term inflows benefited from fixed income and equity indexed products.


Investment services fees totaled $1.6 billion, a decrease of 8% year-over-year and 12% sequentially. Both decreases were primarily driequentially. Both decreases were primarily driven by seasonally lower Depositary Receipts revenue, lower volumes and higher money market fee waivers. Adjusted for the seasonal impact of Depositary receipts revenue, investment services fees decreased 3% both year-over-year and sequentially.


Investment management and performance fees were $730 million, a decrease of 9% year-over-year and flat sequentially. The year-over-year decrease was driven by higher money market fee waivers, lower performance fees and weaker international equity markets, partially offset by net new business. Sequentially, higher performance fees and net new business were offset by lower revenue on equity investments and higher money market fee waivers.


Foreign exchange and other trading revenue totaled $228 million compared with $258 million in the fourth quarter of 2010 and $200 million in the third quarter of 2011. In the fourth quarter of 2011, foreign exchange revenue totaled $183 million, a decrease of 11% year-over-year and 17% sequentially. Both decreases resulted from lower volumes. The year-over-year decrease was partially offset by higher volatility, while sequentially, volatility decreased. Other trading revenue was $45 million in the fourth quarter of 2011 compared with revenue of $52 million in the fourth quarter of 2010 and a loss of $21 million in the third quarter of 2011. The sequential increase was primarily driven by a lower credit valuation adjustment.


Investment and other income totaled $146 million compared with $80 million in the prior year period and $83 million in the third quarter of 2011. The increases compared with both prior periods primarily resulted from a pre-tax gain of $98 million (after-tax gain of $4 million) on the sale of the Shareowner Services business, partially offset by a $30 million write-down of an equity investment.


Net interest revenue and the net interest margin (FTE) were $780 million and 1.27% compared with $775 million and 1.30% sequentially. The changes in net interest revenue and the net interest margin (FTE) were primarily driven by growth in client deposits which were placed with central banks. Average noninterest-bearing client deposits increased $3 billion, or 4%, compared with the third quarter of 2011.

The provision for credit losses was $23 million in the fourth quarter of 2011 compared with a credit of $22 million in both the fourth quarter of 2010 and the third quarter of 2011. The provision in the fourth quarter of 2011 primarily resulted from a broker-dealer customer that filed for bankruptcy in the fourth quarter of 2011.
Total noninterest expense (excluding restructuring charges, merger and integration ("M&I") expenses and amortization of intangible assets) (Non-GAAP) decreased 2% compared with the prior year period and 3% sequentially. The year-over-year decrease reflects lower staff expense partially offset by higher litigation expense. The sequential decrease primarily resulted from lower staff expense reflecting lower incentive expense and a decline in headcount, as well as lower litigation expense and lower volume-driven expenses, partially offset by higher software and equipment, business development and professional, legal and other purchased services expenses.

The fourth quarter of 2011 results include a restructuring charge of $107 million, or $0.06 per diluted common share related to efficiency initiatives to transform operations, technology and corporate services.

The effective tax rate was 30.6% in the fourth quarter of 2011, compared with 27.3% on a continuing operations basis in the fourth quarter of 2010, and 29.7% in the third quarter of 2011. The effective tax rate in the fourth quarter of 2011 was negatively impacted by non-tax deductible goodwill associated with the disposition of Shareowner Services which was largely offset by a more favorable mix of foreign and domestic income.

The unrealized net of tax gain on our total investment securities portfolio was $420 million at Dec. 31, 2011 compared with $461 million at Sept. 30, 2011. The decrease in the valuation of the investment securities portfolio was driven by a lower valuation of non-agency residential mortgage-backed securities.