-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MVaWzxvDhz0Gl+HYjSIsJrBvCy4kM8PC2CkBLlQHk10J6r8k8FV9yoWrR8UN5X5z LdL+VnnESd5HR8x1iH3cpw== 0000009626-04-000090.txt : 20040721 0000009626-04-000090.hdr.sgml : 20040721 20040721113830 ACCESSION NUMBER: 0000009626-04-000090 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040630 ITEM INFORMATION: ITEM INFORMATION: Other events FILED AS OF DATE: 20040721 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANK OF NEW YORK CO INC CENTRAL INDEX KEY: 0000009626 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 132614959 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06152 FILM NUMBER: 04923710 BUSINESS ADDRESS: STREET 1: ONE WALL ST 10TH FL CITY: NEW YORK STATE: NY ZIP: 10286 BUSINESS PHONE: 212-495-1784 MAIL ADDRESS: STREET 1: ONE WALL STREET 31ST FLOOR CITY: NEW YORK STATE: NY ZIP: 10286 8-K 1 r2q048k.txt 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8 - K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): July 21, 2004 THE BANK OF NEW YORK COMPANY, INC. ---------------------------------- (exact name of registrant as specified in its charter) NEW YORK -------- (State or other jurisdiction of incorporation) 001-06152 13-2614959 --------- ---------- (Commission file number) (I.R.S. employer identification number) One Wall Street, New York, NY 10286 ----------------------------- ----- (Address of principal executive offices) (Zip code) 212-495-1784 ------------ (Registrant's telephone number, including area code) 2 ITEM 5. Other Events ------------ Second Quarter of 2004 Financial Results ---------------------------------------- On July 21, 2004, The Bank of New York Company, Inc. issued a press release containing unaudited interim financial information and accompanying discussion for the second quarter of 2004. Exhibit 99 is a copy of such press release and is incorporated herein by reference. ITEM 12. Results of Operations and Financial Condition --------------------------------------------- Press release filed under Item 5 (a) Exhibit Description ------- ----------- 99 Unaudited interim financial information and accompanying discussion for the second quarter of 2004 contained in the press release dated July 21, 2004, of The Bank of New York Company, Inc. 3 SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: July 21, 2004 THE BANK OF NEW YORK COMPANY, INC. (Registrant) By: /s/ Bruce W. Van Saun ------------------------- Name: Bruce W. Van Saun Title: Chief Financial Officer 4 EXHIBIT INDEX ------------- Exhibit No. Description - ----------- ----------- 99 Unaudited interim financial information and accompanying discussion for the second quarter of 2004 contained in the press release dated July 21, 2004, of The Bank of New York Company, Inc. 4 EX-99 2 r2q04ex99.txt EX-99 1 IMMEDIATELY - ----------- Media: Investors: - ----- ---------- R. Jeep Bryant, MD Joseph F. Murphy, MD (212) 635-1569 (212) 635-7740 Gregg A. Scheuing, VP (212) 635-1578 THE BANK OF NEW YORK COMPANY, INC. REPORTS SECOND QUARTER EPS UP 23% to 48 CENTS; RETURN ON EQUITY OF 17% NEW YORK, N.Y., July 21, 2004 -- The Bank of New York Company, Inc. (NYSE: BK) reports second quarter net income of $371 million and diluted earnings per share of 48 cents, compared with net income of $364 million and diluted earnings per share of 47 cents in the first quarter of 2004, and net income of $295 million and diluted earnings per share of 39 cents in the second quarter of 2003. Year-to-date net income was $735 million, or 94 cents of diluted earnings per share, compared to $590 million, or 80 cents of diluted earnings per share in 2003. Second quarter and year-to-date 2003 results included dilution of 2 cents per share from merger and integration costs associated with the Pershing acquisition. Second quarter highlights include issuer services and broker-dealer services fees, which increased 13% and 6%, respectively from the first quarter, as well as private client services and asset management fees, which increased 5%. Net interest income, excluding the first quarter impact of the leveraged 2 lease adjustment, was up 2% sequentially, reflecting modest growth in liquid earning assets. Credit quality trends remained positive, which allowed the Company to slightly reduce its provision for credit losses. Execution and clearing revenues declined by 8% sequentially, reflecting weaker equity market trading volumes. Foreign exchange and other trading revenues declined by 6% relative to the first quarter to $100 million, but remained at historically high levels, up 14% versus a year ago. Chairman and Chief Executive Officer Thomas A. Renyi stated, "The breadth and diversification of our securities servicing and fiduciary businesses again demonstrated its value, driving our fifth straight quarter of sequential earnings growth. While the noticeable drop in equity market trading volumes impacted our execution and clearing business, our fixed-income linked businesses, including securities lending, corporate trust and global collateral management, generated strong revenue growth. In addition, our depositary receipts business continues to build momentum, driven by seasonal dividend activity and higher levels of capital raisings. Continued new business wins across the board further supported growth in revenues and assets under custody. "We remain very focused on managing our expense base and continuing to implement our reengineering and profitability programs. In addition, credit quality remains strong, reflecting the success of our risk management program as well as the improved economic environment. "We remain confident that our business model positions us well to benefit from market activity and capital flows regardless of security type, client segment, or geographic region." 3 SECURITIES SERVICING FEES
2nd 1st 4th 3rd Quarter Quarter Quarter Quarter ------- ------- ------- ------- (Dollars in millions) 2004 2004 2003 2003 ------- ------- ------- ------- Execution and Clearing Services $ 280 $ 303 $ 290 $ 271 Investor Services 229 226 210 212 Issuer Services 155 137 136 127 Broker-Dealer Services 53 50 48 47 ------- ------- ------- ------- Securities Servicing Fees $ 717 $ 716 $ 684 $ 657 ======= ======= ======= =======
Notwithstanding the noticeable drop in sequential equity trading volumes, the diversity of the securities servicing businesses allowed fees to hold steady at $717 million for the second quarter. Execution and clearing services fees decreased $23 million sequentially, or 8%, to $280 million in the second quarter. The execution business was impacted by lower equity market trading volumes in the second quarter, as combined NYSE and NASDAQ trading volumes, excluding program trading, were down 15% from the first quarter. Pershing's correspondent clearing business was also impacted by lower retail activity in May and June which reduced billable trades. Investor services fees were up slightly to $229 million, reflecting higher securities lending, domestic custody, and global funds services fees driven by new business wins, partially offset by slightly lower average asset price levels over the quarter. As of June 30, 2004, assets under custody rose to $8.7 trillion, from $8.6 trillion at March 31, 2004 and $7.8 trillion at June 30, 2003. Issuer services fees recorded a strong quarter, increasing 13% sequentially reflecting good growth in depositary receipts and corporate trust and stable results in stock transfer. Depositary receipts benefited from an increase in seasonal dividend activity, continued active cross-border investing, and an increase in new capital issuances. Corporate trust activity benefited from strength in issuance of international securities. 4 Broker-dealer services fees also showed good growth, increasing $3 million, or 6%, on a sequential quarter basis, as a result of higher volumes due to new business wins in the collateral management businesses and higher levels of mortgage backed and government trading activity. NONINTEREST INCOME
2nd 1st 2nd Quarter Quarter Quarter Year-to-Date ------- ------- ------- ---------------- (Dollars in millions) 2004 2004 2003 2004 2003 ------- ------- ------- ------- ------- Servicing Fees Securities $ 717 $ 716 $ 598 $ 1,433 $ 1,071 Global Payment Services 81 79 80 160 158 ------- ------- ------- ------- ------- 798 795 678 1,593 1,229 Private Client Services and Asset Management Fees 113 108 94 221 184 Service Charges and Fees 94 96 92 190 189 Foreign Exchange and Other Trading Activities 100 106 88 206 154 Securities Gains 12 33 9 45 16 Other 49 92 35 141 69 ------- ------- ------- ------- ------- Total Noninterest Income $ 1,166 $ 1,230 $ 996 $ 2,396 $ 1,841 ======= ======= ======= ======= =======
Total noninterest income for the second quarter of 2004 was $1,166 million. Excluding the $48 million pre-tax gain on sale of a portion of the Company's investment in Wing Hang Bank, Ltd. and the $19 million gain on four sponsor fund investments in the first quarter of 2004, noninterest income increased by $3 million. Excluding the aforementioned gains in the first quarter of 2004, noninterest income for the six months ended June 30, 2004 was $2,329 million, an increase of 27% over the comparable 2003 period, reflecting the impact of the Pershing acquisition and organic growth. Global payment services fees were up $2 million, or 3%, compared with the prior quarter and $1 million, or 1% from a year ago, resulting from higher volumes and conversion of new business. Global payment services increased by 1% on a year-to-date basis over 2003. Private client services and asset management fees for the second quarter were up 5% from the prior quarter and 20% from the second quarter of 2003. The sequential quarter increase reflects continued strong growth at Ivy Asset Management and seasonally higher private client fees related to tax services. The increase from the second quarter of 2003 and on a year-to-date basis 5 reflects growth in Ivy Asset Management as well as higher equity price levels. Total assets under management were $93 billion at June 30, 2004, up from $92 billion at March 31, 2004 and $83 billion a year ago. Service charges and fees were down 2% from the prior quarter, as higher retail service fees were offset by weaker demand for capital markets services. Service charges and fees were up 1% on a year-to-date basis over 2003, reflecting higher retail services fees. Foreign exchange and other trading revenues decreased $6 million from the record first quarter but increased $12 million, or 14%, from a year ago. The continued strong performance this quarter in foreign exchange reflects high levels of client activity, tied to cross-border investing and hedging against currency volatility. For the six months ended June 30, 2004, foreign exchange and other trading activities were up 34% over the six months ended June 30, 2003, reflecting the same factors outlined for the second quarter. Securities gains in the second quarter were $12 million, compared with $33 million in the first quarter of 2004 and $9 million in the second quarter of 2003. In the first quarter of 2004, securities gains included realized gains of $19 million on four sponsor fund investments. For the six months ended June 30, 2004, securities gains were $45 million, up $29 million from the six months ended June 30, 2003. Other noninterest income was $49 million in the second quarter, compared with $92 million in the first quarter of 2004 when other noninterest income included a pre-tax gain of $48 million from the sale of a portion of the Company's investment in Wing Hang Bank Limited. 6 NET INTEREST INCOME
2nd 1st 1st 2nd Quarter Quarter Quarter Quarter Year-to-Date -------- -------- ------- -------- ------------------------ Reported Reported Core** Reported Reported Core** Reported (Dollars in millions) -------- -------- ------- -------- -------- ------ -------- 2004 2004 2004 2003 2004 2004 2003 -------- -------- ------- -------- -------- ------ -------- Net Interest Income $ 421 $ 268 $ 413 $ 398 $ 689 $ 834 $ 784 Tax Equivalent Adjustment* 8 6 6 9 14 14 19 -------- -------- ------- -------- -------- ------ -------- Net Interest Income on a Tax Equivalent Basis $ 429 $ 274 $ 419 $ 407 $ 703 $ 848 $ 803 ======== ======== ======= ======== ======== ====== ======== Net Interest Rate Spread 1.84% 1.13% 1.85% 1.96% 1.49% 1.84% 2.06% Net Yield on Interest Earning Assets 2.08 1.36 2.08 2.21 1.72 2.08 2.32
* See Note (1) ** Excludes SFAS 13 adjustment Net interest income on a taxable equivalent basis was $429 million in the second quarter of 2004, compared with $274 million reported in the first quarter of 2004, and $407 million in the second quarter of 2003. The net interest income rate spread was 1.84% in the second quarter of 2004, compared with 1.13% reported in the first quarter of 2004, and 1.96% in the second quarter of 2003. The net yield on interest earning assets was 2.08% in the second quarter of 2004, compared with 1.36% reported in the first quarter of 2004, and 2.21% in the second quarter of 2003. In the first quarter of 2004, net interest income included a pre-tax charge of $145 million resulting from a cumulative adjustment to the leasing portfolio, which was triggered under Statement of Financial Accounting Standards No. 13 ("SFAS 13") "Accounting for Leases". Excluding the SFAS 13 adjustment, net interest income on a taxable equivalent basis was $419 million in the first quarter of 2004, which reflected a net interest rate spread of 1.85% and a net yield on interest earning assets of 2.08%. The increase in net interest income from the core first quarter of 2004 results is primarily due to a slightly higher level of liquid earning assets, which resulted from the greater deposit flows from servicing customers, as well as a modest shift from fixed rate investment securities to short-term floating assets to better position for higher rates. The increase in net interest 7 income from the second quarter of 2003 reflects the full quarter impact of the Pershing acquisition. For the first six months of 2004, net interest income on a taxable equivalent basis was $703 million, compared with $803 million in the first half of 2003, reflecting the full impact of the Pershing acquisition. The year-to- date net interest income spread was 1.49% in 2004 compared with 2.06% in 2003, while the net yield on interest earning assets was 1.72% in 2004 and 2.32% in 2003. NONINTEREST EXPENSE AND INCOME TAXES
2nd 1st 2nd Quarter Quarter Quarter Year-to-date ------- ------- ------- ---------------- (Dollars in millions) 2004 2004 2003 2004 2003 ------- ------- ------- ------- ------- Salaries and Employee Benefits $ 570 $ 574 $ 498 $ 1,144 $ 921 Net Occupancy 72 81 64 153 122 Furniture and Equipment 51 51 49 102 85 Clearing 44 48 40 92 69 Sub-custodian Expenses 22 22 19 44 35 Software 50 49 43 99 78 Communications 23 24 23 47 44 Amortization of Intangibles 8 8 7 16 10 Merger and Integration Costs - - 25 - 25 Other 172 156 135 328 253 ------- ------- ------- ------- ------- Total Noninterest Expense $ 1,012 $ 1,013 $ 903 $ 2,025 $ 1,642 ======= ======= ======= ======= =======
Noninterest expense for the second quarter of 2004 was $1,012 million, compared with $1,013 million in the prior quarter. Noninterest expense in the first quarter included $18 million related to cost reduction initiatives, including lease terminations, severance and relocation expenses. Second quarter of 2003 included $25 million of merger and integration costs related to the Pershing acquisition. On a sequential quarter basis, after excluding $18 million associated with the cost reduction initiatives, expenses increased modestly by $17 million or 2%. This increase was driven largely by the second year impact of stock option expensing, higher legal costs, increased use of consultants in connection with cost restructuring programs, and seasonal travel and entertainment. After excluding merger and integration costs, noninterest expense for the first six months of 2004 was $2,025 million compared with $1,617 million last 8 year, mainly reflecting higher business activity and the full half impact of the Pershing acquisition. The effective tax rate for the second quarter of 2004 was 34.2%, compared to 23.1% in the first quarter and 34.6% in the second quarter of 2003. The effective tax rate for the six months period ended June 30, 2004 was 29.2%, compared with 34.6% for the six months period ended June 30, 2003. The year-over-year decrease reflects the benefit associated with the SFAS 13 adjustment in the first quarter of 2004. BALANCE SHEET RETURN AND CAPITAL RATIOS Total assets were $97.5 billion at June 30, 2004, compared with $92.7 billion at March 31, 2004, and $99.8 billion at June 30, 2003. The increase in assets from March 31, 2004 reflects the significant liquidity in the markets at June 30, 2004 which the Company's clients left on deposit rather than invested in the equity and fixed income markets. Total shareholders' equity was $8.8 billion at June 30, 2004, compared with $8.8 billion at March 31, 2004, and $8.1 billion at June 30, 2003. Shareholders' equity at June 30, 2004 compared to March 31, 2004 reflects a decline in the securities valuation allowance offset by the retention of earnings. The major reason for the increase in shareholders' equity from a year ago is the retention of earnings. Return on average common equity for the second quarter of 2004 was 17.14%, compared with 17.17% in the first quarter of 2004, and 15.56% in the second quarter of 2003. Return on average assets for the second quarter of 2004 was 1.49%, compared with 1.47% in the first quarter of 2004, and 1.30% in the second quarter of 2003. For the six months of 2004, return on average common equity was 17.15% compared with 16.61% in 2003, while return on average assets was 1.48% compared with 1.39% in 2003. The Company's estimated regulatory Tier 1 capital and Total capital ratios were 7.69% and 11.60% at June 30, 2004, compared with 7.60% and 11.70% at March 31, 2004, and 6.83% and 11.07% at June 30, 2003. The regulatory leverage ratio was 6.00% at June 30, 2004, compared with 5.83% at March 31, 2004, and 5.85% at June 30, 2003. The Company's tangible common equity as a percentage of total assets was 4.95% at June 30, 2004, down from 5.22% at March 31, 2004 driven by 9 the aforementioned increase in liquidity and a decline in the securities valuation allowance. CREDIT LOSS PROVISION AND NET CHARGE-OFFS
2nd 1st 2nd Quarter Quarter Quarter Year-to-Date ------- ------- ------- ---------------- (Dollars in millions) 2004 2004 2003 2004 2003 ------- ------- ------- ------- ------ Provision $ 10 $ 12 $ 40 $ 22 $ 80 ======= ======= ======= ======= ====== Net Charge-offs: Commercial $ (11) $ (5) $ (34) $ (16) $ (59) Foreign (8) (10) (7) (18) (7) Other - - - - (10) Consumer (6) (11) (5) (17) (10) ------- ------- ------- ------- ------ Total $ (25) $ (26) $ (46) $ (51) $ (86) ======= ======= ======= ======= ====== Other Real Estate Expenses $ - $ - $ - $ - $ -
The provision was $10 million in the second quarter of 2004 compared to $12 million in the first quarter of 2004 and $40 million in the second quarter of 2003. For the first six months of 2004, provision was $22 million compared with $80 million in 2003. The lower provision compared with the second quarter and first half of 2003 reflects the Company's improved risk profile as well as improvements in the U.S. economy. Declines in nonperforming and criticized assets, improved borrower ratings, and reductions in large exposures are indicative of the Company's reduced credit risk. 10 The allowance for credit losses was $775 million at June 30, 2004, $790 million at March 31, 2004, and $824 million at June 30, 2003. The allowance for credit losses as a percent of non-margin loans decreased to 2.42% at June 30, 2004, compared with 2.64% at March 31, 2004, and 2.50% at June 30, 2003.
June 30 March 31 June 30 (Dollars in millions) 2004 2004 2003 --------- --------- --------- Margin Loans $ 6,114 $ 6,130 $ 4,877 Non-Margin Loans 32,091 29,940 32,919 Total Loans 38,205 36,070 37,796 Allowance for Loan Losses 598 632 669 Allowance for Lending-Related Commitments 177 158 155 Total Allowance for Credit Losses* 775 790 824 Allowance for Credit Losses As a Percent of Total Loans 2.03% 2.19% 2.18% Allowance for Credit Losses As a Percent of Non-Margin Loans 2.42 2.64 2.50 Allowance for Loan Losses As a Percent of Total Loans 1.57 1.75 1.77 Allowance for Loan Losses As a Percent of Non-Margin Loans 1.86 2.11 2.03
* See Note (2) NONPERFORMING ASSETS
Change 6/30/04 vs. (Dollars in millions) 06/30/04 03/31/04 03/31/04 --------- --------- ---------- Loans: Commercial $ 208 $ 231 $ (23) Foreign 53 66 (13) Other 50 46 4 --------- --------- ---------- Total Nonperforming Loans 311 343 (32) Other Real Estate - - - --------- --------- ---------- Total Nonperforming Assets $ 311 $ 343 $ (32) ========= ========= ========== Nonperforming Assets Ratio 1.0% 1.1% Allowance for Loan Losses/Nonperforming Loans 192.2 184.4 Allowance for Loan Losses/Nonperforming Assets 192.2 184.4 Allowance for Credit Losses/Nonperforming Loans 249.1 230.5 Allowance for Credit Losses/Nonperforming Assets 249.1 230.5
Nonperforming assets declined by $32 million, or 9%, during the second quarter to $311 million and are down 29% from a year ago. The sequential quarter decrease primarily reflects paydowns and charge-offs of commercial and foreign loans. The ratio of the allowance for credit losses to nonperforming assets increased to 249.1% at June 30, 2004, compared with 230.5% at March 31, 2004, and 188.6% at June 30, 2003. 11 OTHER DEVELOPMENTS In May, the Company made a strategic investment in London-based Netik, LLC. Netik provides market-leading data management and consolidated reporting capabilities that leverage its data warehouse for portfolio and investment information, reference data, and analytics. The Company uses Netik products as part of its BNY SmartSource(service mark) outsourcing solution, and will also partner with Netik to make the product available to other financial institutions. Late in the second quarter, the Company acquired a unit investment trust business that services approximately $20 billion in assets for over 4,200 different series of unit investment trusts. During the second quarter, the Company agreed to acquire Osprey Partners LLC's portfolio accounting technology to broaden its managed account services offering. The acquisition will allow the Company to integrate the portfolio accounting function within its proprietary managed account services offering and fully support the comprehensive portfolio view created by unified managed account platforms. In July, the Company's new $2 billion shelf registration became effective. Combined with the existing shelf registration the Company now has the capacity to issue approximately $2.5 billion of debt, preferred stock, preferred trust securities, or common stock. 12 ADDITIONAL INFORMATION Thomas A. Renyi, chairman and chief executive officer, and Bruce W. Van Saun, senior executive vice president and chief financial officer, will review the quarterly results in a live conference call and audio webcast today at 8:00 am ET. The presentation will be accessible from the Company's website at www.bankofny.com/earnings and also by telephone at (888) 790-0319 within the United States or (610) 769-3531 internationally. The passcode is "The Bank of New York." A replay of the call will be available through the Company's website and also by telephone at (866) 403-7108 within the United States or (203) 369-0580 internationally. The Bank of New York Company, Inc. (NYSE: BK) is a global leader in securities servicing for issuers, investors and financial intermediaries. The Company plays an integral role in the infrastructure of the capital markets, servicing securities in more than 100 markets worldwide. The Company provides quality solutions through leading technology for global corporations, financial institutions, asset managers, governments, non-profit organizations, and individuals. Its principal subsidiary, The Bank of New York, founded in 1784, is the oldest bank in the United States and has a distinguished history of serving clients around the world through its five primary businesses: Securities Servicing and Global Payment Services, Private Client Services and Asset Management, Corporate Banking, Global Market Services, and Retail Banking. Additional information on the Company is available at www.bankofny.com. *************************** Notes: (1) A number of amounts related to net interest income are presented on a "taxable equivalent basis". The Company believes that this presentation provides comparability of net interest income arising from both taxable and tax-exempt sources and is consistent with industry standards. (2) The Company adopts new accounting policies as they become accepted as a best practice or required by generally accepted accounting principles. Accordingly, at December 31, 2003, the Company split its allowance for credit losses into an allowance for loan losses and an allowance for lending-related commitments such as unfunded loan commitments and standby letters of credit. This resulted in a decrease in the allowance for loan losses of $136 million and a corresponding increase in other liabilities (which includes the allowance for lending-related commitments). Prior period balance sheets have been restated. Credit expenses related to the allowance for loan losses and the allowance for lending-related commitments are reported in the provision for credit losses in the income statement. To aid in the comparison of the Company's results with other companies that have not yet adopted this practice, 13 the Company provides various credit ratios based both on the allowance for credit losses and the allowance for loan losses. FORWARD LOOKING STATEMENTS All statements in this press release other than statements of historical fact are forward looking statements including, among other things, projections with respect to revenue and earnings and the Company's plans and objectives and as such are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward looking statements. These include lower than expected performance or higher than expected costs in connection with acquisitions and integration of acquired businesses, the level of capital market activity, changes in customer credit quality, the effects of capital reallocation, portfolio performance, ultimate differences from management projections or market forecasts, the actions that management could take in response to these changes and other factors described under the heading "Forward Looking Statements and Factors That Could Affect Future Results" in the Company's 2003 Form 10-K and First Quarter 2004 Form 10-Q which have been filed with the SEC and are available at the SEC's website (www.sec.gov). Forward looking statements speak only as of the date they are made. The Company will not update forward looking statements to reflect factual assumptions, circumstances or events which have changed after a forward looking statement was made. (Financial highlights and detailed financial statements are attached.) 14
THE BANK OF NEW YORK COMPANY, INC. Financial Highlights (Dollars in millions, except per share amounts) (Unaudited) June 30, March 31, June 30, 2004 2004 2003 ------------ ------------- ------------ Quarter ------- Revenue (tax equivalent basis) $ 1,775 $ 1,677 $ 1,601 Net Income 371 364 295 Basic EPS 0.48 0.47 0.39 Diluted EPS 0.48 0.47 0.39 Cash Dividends Per Share 0.20 0.19 0.19 Return on Average Common Shareholders' Equity 17.14% 17.17% 15.56% Return on Average Assets 1.49 1.47 1.30 Efficiency Ratio 63.93 68.90 64.80 Year-to-date ------------ Revenue (tax equivalent basis) $ 3,450 $ 1,677 $ 3,031 Net Income 735 364 590 Basic EPS 0.95 0.47 0.80 Diluted EPS 0.94 0.47 0.80 Cash Dividends Per Share 0.39 0.19 0.38 Return on Average Common Shareholders' Equity 17.15% 17.17% 16.61% Return on Average Assets 1.48 1.47 1.39 Efficiency Ratio 66.30 68.90 62.50 Assets $ 97,521 $ 92,652 $ 99,759 Loans 38,205 36,070 37,796 Securities 22,986 24,083 20,392 Deposits - Domestic 36,279 33,639 37,319 - Foreign 24,781 22,443 27,336 Long-Term Debt 6,025 6,276 6,515 Common Shareholders' Equity 8,785 8,760 8,113 Common Shareholders' Equity Per Share $ 11.29 $ 11.27 $ 10.50 Market Value Per Share of Common Stock 29.48 31.50 28.75 Allowance for Credit Losses as a Percent of Total Loans 2.03% 2.19% 2.18% Allowance for Credit Losses as a Percent of Non-Margin Loans 2.42 2.64 2.50 Allowance for Loan Losses as a Percent of Total Loans 1.57 1.75 1.77 Allowance for Loan Losses as a Percent of Non-Margin Loans 1.86 2.11 2.03 Tier 1 Capital Ratio 7.69 7.60 6.83 Total Capital Ratio 11.60 11.70 11.07 Leverage Ratio 6.00 5.83 5.85 Tangible Common Equity Ratio 4.95 5.22 4.32 Employees 23,001 22,820 23,106 Assets Under Custody (In trillions) Total Assets Under Custody $ 8.7 $ 8.6 $ 7.8 Equity Securities 34% 33% 32% Fixed Income Securities 66 67 68 Cross-Border Assets Under Custody $ 2.4 $ 2.4 $ 2.2 Assets Under Administration (In billions) $ 32 $ 33 $ 27 Assets Under Management (In billions) Total Assets Under Management 93 92 83 Equity Securities 36% 36% 32% Fixed Income Securities 22 22 23 Alternative Investments 14 13 9 Liquid Assets 28 29 36
15 THE BANK OF NEW YORK COMPANY, INC. Consolidated Statements of Income (Dollars in millions, except per share amounts) (Unaudited)
For the three For the six months ended months ended June 30, June 30, 2004 2003 2004 2003 ------ ------ ------ ------ Interest Income - --------------- Loans $ 272 $ 310 $ 389 $ 620 Margin loans 35 21 69 24 Securities Taxable 180 155 360 315 Exempt from Federal Income Taxes 10 13 19 26 ------ ------ ------ ------ 190 168 379 341 Deposits in Banks 78 41 147 71 Federal Funds Sold and Securities Purchased Under Resale Agreements 17 24 33 39 Trading Assets 9 32 23 76 ------ ------ ------ ------ Total Interest Income 601 596 1,040 1,171 ------ ------ ------ ------ Interest Expense - ---------------- Deposits 126 138 244 284 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 3 4 5 7 Other Borrowed Funds 9 5 18 7 Customer Payables 12 9 24 9 Long-Term Debt 30 42 60 80 ------ ------ ------ ------ Total Interest Expense 180 198 351 387 ------ ------ ------ ------ Net Interest Income 421 398 689 784 - ------------------- Provision for Credit Losses 10 40 22 80 ------ ------ ------ ------ Net Interest Income After Provision for Credit Losses 411 358 667 704 ------ ------ ------ ------ Noninterest Income - ------------------ Servicing Fees Securities 717 598 1,433 1,071 Global Payment Services 81 80 160 158 ------ ------ ------ ------ 798 678 1,593 1,229 Private Client Services and Asset Management Fees 113 94 221 184 Service Charges and Fees 94 92 190 189 Foreign Exchange and Other Trading Activities 100 88 206 154 Securities Gains 12 9 45 16 Other 49 35 141 69 ------ ------ ------ ------ Total Noninterest Income 1,166 996 2,396 1,841 ------ ------ ------ ------ Noninterest Expense - ------------------- Salaries and Employee Benefits 570 498 1,144 921 Net Occupancy 72 64 153 122 Furniture and Equipment 51 49 102 85 Clearing 44 40 92 69 Sub-custodian Expenses 22 19 44 35 Software 50 43 99 78 Communications 23 23 47 44 Amortization of Intangibles 8 7 16 10 Merger and Integration Costs - 25 - 25 Other 172 135 328 253 ------ ------ ------ ------ Total Noninterest Expense 1,012 903 2,025 1,642 ------ ------ ------ ------ Income Before Income Taxes 565 451 1,038 903 Income Taxes 194 156 303 313 ------ ------ ------ ------ Net Income $ 371 $ 295 $ 735 $ 590 - ---------- ====== ====== ====== ====== Per Common Share Data: - ---------------------- Basic Earnings $ 0.48 $ 0.39 $ 0.95 $ 0.80 Diluted Earnings 0.48 0.39 0.94 0.80 Cash Dividends Paid 0.20 0.19 0.39 0.38 Diluted Shares Outstanding 779 757 778 742
16
THE BANK OF NEW YORK COMPANY, INC. Consolidated Balance Sheets (Dollars in millions, except per share amounts) (Unaudited) June 30, 2004 December 31, 2003 ------------- ----------------- Assets - ------ Cash and Due from Banks $ 3,102 $ 3,843 Interest-Bearing Deposits in Banks 9,846 8,286 Securities Held-to-Maturity 1,438 261 Available-for-Sale 21,548 22,642 ------------- ----------------- Total Securities 22,986 22,903 Trading Assets at Fair Value 3,448 5,406 Federal Funds Sold and Securities Purchased Under Resale Agreements 8,091 4,829 Loans (less allowance for loan losses of $598 in 2004 and $668 in 2003) 37,607 34,615 Premises and Equipment 1,404 1,398 Due from Customers on Acceptances 311 170 Accrued Interest Receivable 277 214 Goodwill 3,373 3,276 Intangible Assets 792 816 Other Assets 6,284 6,641 ------------- ----------------- Total Assets $ 97,521 $ 92,397 ============= ================= Liabilities and Shareholders' Equity - ------------------------------------ Deposits Noninterest-Bearing (principally domestic offices) $ 16,119 $ 14,789 Interest-Bearing Domestic Offices 20,574 19,282 Foreign Offices 24,367 22,335 ------------- ----------------- Total Deposits 61,060 56,406 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,315 1,039 Trading Liabilities 2,561 2,519 Payables to Customers and Broker-Dealers 9,439 10,192 Other Borrowed Funds 1,100 834 Acceptances Outstanding 313 172 Accrued Taxes and Other Expenses 4,037 4,256 Accrued Interest Payable 136 82 Other Liabilities (including allowance for lending-related commitments of $177 in 2004 and $136 in 2003) 2,750 2,348 Long-Term Debt 6,025 6,121 ------------- ----------------- Total Liabilities 88,736 83,969 ------------- ----------------- Shareholders' Equity Class A Preferred Stock - par value $2.00 per share, authorized 5,000,000 shares, outstanding 3,000 shares in 2004 and 3,000 shares in 2003 - - Common Stock-par value $7.50 per share, authorized 2,400,000,000 shares, issued 1,043,348,210 shares in 2004 and 1,039,968,482 shares in 2003 7,825 7,800 Additional Capital 1,696 1,647 Retained Earnings 5,764 5,330 Accumulated Other Comprehensive Income (53) 72 ------------- ----------------- 15,232 14,849 Less: Treasury Stock (265,321,337 shares in 2004 and 264,649,827 shares in 2003), at cost 6,446 6,420 Loan to ESOP (126,960 shares in 2004 and 126,960 shares in 2003), at cost 1 1 ------------- ----------------- Total Shareholders' Equity 8,785 8,428 ------------- ----------------- Total Liabilities and Shareholders' Equity $ 97,521 $ 92,397 ============= ================= - --------------------------------------------------------------------------------------------------- Note: The balance sheet at December 31, 2003 has been derived from the audited financial statements at that date.
17
THE BANK OF NEW YORK COMPANY, INC. Average Balances and Rates on a Taxable Equivalent Basis (Preliminary) (Dollars in millions) For the three months For the three months ended June 30, 2004 ended June 30, 2003 ---------------------------- ---------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate --------- -------- ------- --------- -------- ------- ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 12,779 $ 78 2.47% $ 7,049 $ 41 2.37% Federal Funds Sold and Securities Purchased Under Resale Agreements 7,340 17 0.92 7,931 24 1.20 Margin Loans 6,495 35 2.18 3,492 21 2.42 Loans Domestic Offices 22,236 209 3.79 20,281 220 4.35 Foreign Offices 8,947 62 2.80 11,964 90 3.01 --------- -------- --------- -------- Non-Margin Loans 31,183 271 3.50 32,245 310 3.85 --------- -------- --------- -------- Securities U.S. Government Obligations 479 3 2.46 209 2 4.16 U.S. Government Agency Obligations 4,008 33 3.27 3,019 29 3.84 Obligations of States and Political Subdivisions 235 5 7.96 352 6 7.30 Other Securities 18,260 158 3.44 15,140 140 3.67 Trading Securities 2,082 9 1.69 4,346 32 2.95 --------- -------- --------- ------- Total Securities 25,064 208 3.29 23,066 209 3.62 --------- -------- --------- ------- Total Interest-Earning Assets 82,861 609 2.95% 73,783 605 3.29% -------- ------- Allowance for Credit Losses (629) (826) Cash and Due from Banks 2,842 2,748 Other Assets 15,299 15,219 --------- --------- TOTAL ASSETS $ 100,373 $ 90,924 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 6,864 $ 12 0.68% $ 7,239 $ 17 0.94% Savings 9,357 15 0.66 9,039 18 0.81 Certificates of Deposit $100,000 & Over 3,917 12 1.21 4,649 19 1.63 Other Time Deposits 953 4 1.60 1,350 5 1.55 Foreign Offices 26,568 83 1.26 23,827 79 1.32 --------- -------- --------- -------- Total Interest-Bearing Deposits 47,659 126 1.06 46,104 138 1.20 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,612 3 0.68 1,428 4 1.10 Payables to Customers and Broker-Dealers 6,813 12 0.69 3,886 9 0.88 Other Borrowed Funds 2,387 9 1.51 1,386 5 1.57 Long-Term Debt 6,139 30 1.92 6,469 42 2.53 --------- -------- --------- -------- Total Interest-Bearing Liabilities 64,610 180 1.11% 59,273 198 1.33% -------- -------- Noninterest-Bearing Deposits 14,829 12,383 Other Liabilities 12,230 11,661 Common Shareholders' Equity 8,704 7,607 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 100,373 $ 90,924 ========= ========= Net Interest Earnings and Interest Rate Spread $ 429 1.84% $ 407 1.96% ======== ======= ======== ======= Net Yield on Interest-Earning Assets 2.08% 2.21% ======= =======
18 THE BANK OF NEW YORK COMPANY, INC. Average Balances and Rates on a Taxable Equivalent Basis (Preliminary) (Dollars in millions)
For the six months For the six months ended June 30, 2004 ended June 30, 2003 -------------------------- -------------------------- Average Average Average Average Balance Interest Rate Balance Interest Rate ------- -------- ------- ------- -------- ------- ASSETS - ------ Interest-Bearing Deposits in Banks (primarily foreign) $ 12,235 $ 147 2.41% $ 6,024 $ 71 2.38% Federal Funds Sold and Securities Purchased Under Resale Agreements 7,228 33 0.93 6,475 39 1.21 Margin Loans 6,337 69 2.18 1,970 24 2.43 Loans Domestic Offices 21,655 264 2.46 19,471 435 4.50 Foreign Offices 9,074 125 2.77 12,424 186 3.03 -------- -------- ------- -------- Non-Margin Loans 30,729 389 2.55 31,895 621 3.93 -------- -------- ------- -------- Securities U.S. Government Obligations 459 5 2.39 267 5 3.88 U.S. Government Agency Obligations 4,154 68 3.25 3,135 63 4.02 Obligations of States and Political Subdivisions 241 8 6.73 367 13 7.07 Other Securities 18,135 311 3.44 14,582 278 3.80 Trading Securities 2,417 24 1.95 5,025 76 3.05 -------- -------- ------- -------- Total Securities 25,406 416 3.28 23,376 435 3.72 -------- -------- ------- -------- Total Interest-Earning Assets 81,935 1,054 2.59% 69,740 1,190 3.44% -------- -------- Allowance for Credit Losses (654) (828) Cash and Due from Banks 2,907 2,780 Other Assets 15,838 14,036 -------- ------- TOTAL ASSETS $100,026 $85,728 ======== ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Interest-Bearing Deposits Money Market Rate Accounts $ 6,736 $ 23 0.68% $ 7,409 $ 35 0.97% Savings 9,253 31 0.66 8,814 38 0.86 Certificates of Deposit $100,000 & Over 3,952 24 1.23 4,687 39 1.69 Other Time Deposits 7,916 27 0.70 1,311 11 1.68 Foreign Offices 19,269 139 1.46 23,847 161 1.36 -------- -------- ------- -------- Total Interest-Bearing Deposits 47,126 244 1.04 46,068 284 1.24 Federal Funds Purchased and Securities Sold Under Repurchase Agreements 1,612 5 0.67 1,360 7 1.04 Other Borrowed Funds 2,393 18 1.50 823 7 1.73 Payables to Customers and Broker-Dealers 6,893 24 0.71 2,219 9 0.80 Long-Term Debt 6,174 60 1.94 5,958 80 2.68 -------- -------- ------- -------- Total Interest-Bearing Liabilities 64,198 351 1.10% 56,428 387 1.38% -------- -------- Noninterest-Bearing Deposits 14,422 11,871 Other Liabilities 12,793 10,261 Common Shareholders' Equity 8,613 7,168 -------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $100,026 $85,728 ======== ======= Net Interest Earnings and Interest Rate Spread $ 703 1.49% $ 803 2.06% ======== ======= ======== ======= Net Yield on Interest-Earning Assets 1.72% 2.32% ======= =======
-----END PRIVACY-ENHANCED MESSAGE-----