Bank of N.Y. Mellon Sees Post-Deal Opportunities

By Ackermann, Matt | American Banker, October 19, 2007 | Go to article overview

Bank of N.Y. Mellon Sees Post-Deal Opportunities


Ackermann, Matt, American Banker


Bank of New York Mellon Corp. expects to add $250 million to $400 million of revenue by 2011 as a result of synergies from the megamerger it completed in July, the company's top executives said during its third-quarter earnings call on Thursday.

Gerald L. Hassell, the president of the New York company, which reported 11% profit growth for the quarter, said it has identified 71 "revenue synergy opportunities." The top 15 ideas should generate 60% of the extra revenue forecast for the next four years, he said.

"The largest opportunity is the cross-selling of asset management and asset servicing, and that is already getting good traction," Mr. Hassell said. "The China mandate is a good example, and we are seeing opportunities like that around the world."

Bank of New York Mellon in September won a $4 billion mandate to be subadviser and global custodian for China Southern Fund Management Co. Mr. Hassell said his company expects to announce another large international mandate in the next couple of weeks.

Robert P. Kelly, Bank of New York Mellon's chief executive officer, said the company has seen rapid growth overseas. Overall, Bank of New York Mellon is generating 31% of its revenue abroad, up from 25% a year earlier. About 36% of its asset management business and 39% of its asset servicing business is generated overseas, he said.

"We are growing faster in Europe and Asia than we are in the U.S., and we expect that will continue," he said during the conference call. "We have great momentum overseas."

In addition to China, Mr. Hassell said, the company won mandates in Korea, Ireland, and elsewhere in Europe in the third quarter. "We had 16 wins for 16 bids we made for mid- and back-office services, accounting for $220 billion in assets," he said.

Analysts said Bank of New York Mellon's expectations for incremental revenue might be more than just post-merger optimism.

"Historically, I dismiss these expectations because companies can't reach the gains they expect, but in this case I am more optimistic - particularly when it comes to the cash management business for the custody clients of legacy Bank of New York customers," said Gerard Cassidy, an analyst at Royal Bank of Canada's RBC Capital Markets, in an interview on Thursday. "Bank of New York didn't have cash management services to offer to its customers and outsourced these services to a third party, but Mellon has that business. It is something that is really easily cross-sold."

There appears to be "real legitimacy" to BNY Mellon's revenue synergies, Mr. …

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