BNY Mellon's cost-cutting drive hit by software outage
By Ross Kerber
BOSTON (Reuters) - Bank of New York Mellon Corp (BK.N: Quote) on Tuesday reported third-quarter results that beat expectations, but said its cost-cutting drive was interrupted by a summertime software outage that forced it to compensate clients.
The large custody bank roiled much of the U.S. mutual fund industry in August when one of the accounting systems it uses to generate prices for funds collapsed. The problems lasted more than a week and affected about $400 billion in assets. ((reut.rs/1kkLxgG))
Speaking on a conference call with analysts to discuss the earnings, BNY Mellon Chief Financial Officer Thomas Gibbons said expenses in the period were higher because of concessions the company gave to clients as a result of the glitch.
The bank did not break out an exact figure but said payment waivers or refunds to clients were accounted for in its "other" non-interest expense line of $268 million during the quarter, which was 7 percent higher than in the previous quarter and year-ago quarter. The "other" category also was the only type of non-interest expense to increase compared with a year ago, BNY Mellon said.
Because of the outage, clients "went through a challenging week, so we wanted to make sure we were proactive in covering their costs and taking care of them," BNY Mellon Chief Executive Gerald Hassell said on the conference call.
Hassell said the bank is "actively working with the clients, working with their fund boards, making sure that they fully understand what happened and how we recovered and why the system is stable and safe."
Hassell added that the bank is considering whether to start charging clients for U.S. dollar-denominated deposits, in the face of low interest rates. It began charging to hold euro-denominated deposits a year ago. ((reut.rs/1Gg8lIm))