BNY Mellon Posts 3Q Loss on Hefty Charge

In this Sept. 30, 2009 photo, a man leaves the Bank of New York Mellon in New York. Bank of New York...

In this Sept. 30, 2009 photo, a man leaves the Bank of New York Mellon in New York. Bank of New York Mellon Corp. said Tuesday, Oct. 20, 2009, that it took a hefty charge during the third quarter to restructure its investment portfolio, resulting in a loss of almost $2.5 billion for the period.(AP Photo/Mark Lennihan)

(AP)

Bank of New York Mellon Corp. said Tuesday that it took a hefty charge during the third quarter to restructure its investment portfolio, resulting in a loss of almost $2.5 billion for the period.

The New York-based trust bank said selling and writing down the value of its most risky securities during the quarter should benefit its net interest revenue by as much as $175 million next year and significantly reduce the risk of future losses in the portfolio. The bank doesn't expect the charge to materially impact its capital.

BNY Mellon shares rose more than 6 percent, gaining $1.77 to $29 in midday trading.

Because BNY Mellon is not a traditional retail bank, it has little direct exposure to risky consumer loans and mortgages that have plagued traditional banks over the last several quarters. But like other financial firms, BNY Mellon has taken hits on its investments in securities backed by residential mortgages and other real estate-related loans as their value withers amid the deterioration of the housing market.

BNY Mellon has sold $3.6 billion of the riskiest assets in its investment portfolio, and restructured an additional $8.5 billion of securities. The efforts resulted in a charge of about $3 billion, or $2.54 per share. BNY Mellon said it may recover a portion of the loss over time as the value of the securities it has kept an interest in increase.

"We're putting our investment securities issues behind us," said Chairman and CEO Robert Kelly in a conference call with investors.

The charge led the bank to report a net loss of $2.46 billion, or $2.05 a share, for the period ended Sept. 30. A year ago, the bank earned $303 million, or 26 cents per share.

Excluding the restructuring charge and other one-time items, BNY Mellon said it earned 54 cents per share, versus an adjusted profit of 81 cents per share a year earlier. Analysts, who typically exclude unusual items from their estimates, were expecting a profit of 48 cents per share, according to a poll by Thomson Reuters.