Edgar Filing: Bank of New York Mellon Corp

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[ X ] Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2017

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 001-35651

THE BANK OF NEW YORK MELLON CORPORATION

(Exact name of registrant as specified in its charter)



Delaware	13-2614959
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

225 Liberty Street

New York, New York 10286

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code -- (212) 495-1784

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X No ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer [ X ]	Smaller reporting company [ ]
Accelerated filer [ ]	Emerging growth company [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ___ No X

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



	Class	Outstanding as of
		June 30, 2017
	Common Stock, $0.01 par value	1,033,156,201

THE BANK OF NEW YORK MELLON CORPORATION

Second Quarter 2017 Form 10-Q

Table of Contents



	Page
Consolidated Financial Highlights (unaudited)	2

Part I - Financial Information
Items 2. and 3. Management’s Discussion and Analysis of Financial Condition and Results of Operations; Quantitative and Qualitative Disclosures about Market Risk:
General	4
Overview	4
Key second quarter 2017 and subsequent events	4
Highlights of second quarter 2017 results	5
Fee and other revenue	7
Net interest revenue	10
Average balances and interest rates	11
Noninterest expense	13
Income taxes	14
Review of businesses	14
Critical accounting estimates	23
Consolidated balance sheet review	25
Liquidity and dividends	35
Capital	40
Trading activities and risk management	47
Asset/liability management	50
Off-balance sheet arrangements	51
Supplemental information - Explanation of GAAP and Non-GAAP financial measures	52
Recent accounting and regulatory developments	56
Website information	59

Item 1. Financial Statements:
Consolidated Income Statement (unaudited)	60
Consolidated Comprehensive Income Statement (unaudited)	62
Consolidated Balance Sheet (unaudited)	63
Consolidated Statement of Cash Flows (unaudited)	64
Consolidated Statement of Changes in Equity (unaudited)	65



	Page
Notes to Consolidated Financial Statements:
Note 1—Basis of presentation	66
Note 2—Accounting change and new accounting guidance	66
Note 3—Acquisitions	67
Note 4—Securities	67
Note 5—Loans and asset quality	72
Note 6—Goodwill and intangible assets	78
Note 7—Other assets	80
Note 8—Net interest revenue	81
Note 9—Employee benefit plans	81
Note 10—Income taxes	82
Note 11—Variable interest entities and securitization	82
Note 12—Preferred stock	84
Note 13—Other comprehensive income (loss)	85
Note 14—Fair value measurement	86
Note 15—Fair value option	93
Note 16—Derivative instruments	93
Note 17—Commitments and contingent liabilities	101
Note 18—Lines of business	108
Note 19—Supplemental information to the Consolidated Statement of Cash Flows	111

Item 4. Controls and Procedures	112
Forward-looking Statements	113

Part II - Other Information
Item 1. Legal Proceedings	115
Item 1A. Risk Factors	115
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	117
Item 6. Exhibits	117

Signature	118
Index to Exhibits	119

The Bank of New York Mellon Corporation (and its subsidiaries)

Consolidated Financial Highlights (unaudited)



	Quarter ended									Year-to-date
(dollar amounts in millions, except per common share amounts and unless otherwise noted)	June 30, 2017			March 31, 2017			June 30, 2016			June 30, 2017			June 30, 2016
Results applicable to common shareholders of The Bank of New York Mellon Corporation:
Net income	$	926		$	880		$	825		$	1,806		$	1,629
Basic earnings per share	0.88			0.83			0.76			1.71			1.49
Diluted earnings per share	0.88			0.83			0.75			1.70			1.48

Fee and other revenue	$	3,120		$	3,018		$	2,999		$	6,138		$	5,969
Income from consolidated investment management funds	10			33			10			43			4
Net interest revenue	826			792			767			1,618			1,533
Total revenue	$	3,956		$	3,843		$	3,776		$	7,799		$	7,506

Return on common equity (annualized) (a)	10.4		%	10.2		%	9.3		%	10.3		%	9.2		%
Adjusted return on common equity (annualized) – Non-GAAP (a)(b)	10.8		%	10.7		%	9.7		%	10.8		%	9.7		%

Return on tangible common equity (annualized) – Non-GAAP (a)(c)	21.9		%	22.2		%	20.4		%	22.1		%	20.5		%
Adjusted return on tangible common equity (annualized) – Non-GAAP (a)(b)(c)	22.1		%	22.4		%	20.5		%	22.2		%	20.7		%

Return on average assets (annualized)	1.09		%	1.06		%	0.89		%	1.07		%	0.89		%

Fee revenue as a percentage of total revenue	79		%	78		%	79		%	79		%	79		%

Percentage of non-U.S. total revenue	35		%	34		%	34		%	34		%	33		%

Pre-tax operating margin (a)	33		%	31		%	31		%	32		%	30		%
Adjusted pre-tax operating margin – Non-GAAP (a)(b)	35		%	33		%	33		%	34		%	32		%

Net interest margin	1.14		%	1.13		%	0.97		%	1.14		%	0.98		%
Net interest margin on a fully taxable equivalent (“FTE”) basis – Non-GAAP (d)	1.16		%	1.14		%	0.98		%	1.15		%	1.00		%

Assets under management (“AUM”) at period end (in billions) (e)	$	1,771		$	1,727		$	1,664		$	1,771		$	1,664
Assets under custody and/or administration (“AUC/A”) at period end (in trillions) (f)	$	31.1		$	30.6		$	29.5		$	31.1		$	29.5
Market value of securities on loan at period end (in billions) (g)	$	336		$	314		$	278		$	336		$	278

Average common shares and equivalents outstanding (in thousands):
Basic	1,035,829			1,041,158			1,072,583			1,038,479			1,076,112
Diluted	1,041,879			1,047,746			1,078,271			1,044,809			1,081,847

Selected average balances:
Interest-earning assets	$	289,496		$	283,421		$	318,433		$	286,475		$	314,556
Assets of operations	$	341,607		$	335,080		$	372,974		$	338,362		$	368,110
Total assets	$	342,515		$	336,200		$	374,220		$	339,375		$	369,387
Interest-bearing deposits	$	142,336		$	139,820		$	165,122		$	141,084		$	163,569
Long-term debt	$	27,398		$	25,882		$	22,838		$	26,644		$	22,197
Noninterest-bearing deposits	$	73,886		$	73,555		$	84,033		$	73,721		$	83,489
Preferred stock	$	3,542		$	3,542		$	2,552		$	3,542		$	2,552
Total The Bank of New York Mellon Corporation common shareholders’ equity	$	35,862		$	34,965		$	35,827		$	35,416		$	35,539

Other information at period end:
Cash dividends per common share	$	0.19		$	0.19		$	0.17		$	0.38		$	0.34
Common dividend payout ratio	22		%	23		%	23		%	22		%	23		%
Common dividend yield (annualized)	1.5		%	1.6		%	1.8		%	1.5		%	1.8		%
Closing stock price per common share	$	51.02		$	47.23		$	38.85		$	51.02		$	38.85
Market capitalization	$	52,712		$	49,113		$	41,479		$	52,712		$	41,479
Book value per common share (a)	$	35.26		$	34.23		$	33.72		$	35.26		$	33.72
Tangible book value per common share – Non-GAAP (a)(c)	$	17.53		$	16.65		$	16.25		$	17.53		$	16.25
Full-time employees	52,800			52,600			52,200			52,800			52,200
Common shares outstanding (in thousands)	1,033,156			1,039,877			1,067,674			1,033,156			1,067,674

2 BNY Mellon

Consolidated Financial Highlights (unaudited) (continued)



Regulatory ratios	June 30, 2017		March 31, 2017		Dec. 31, 2016
Average liquidity coverage ratio (“LCR”) (h)	116	%	117	%	114	%

Consolidated regulatory capital ratios: (i)
Standardized:
Common equity Tier 1 (“CET1”) ratio	12.0	%	12.0	%	12.3	%
Tier 1 capital ratio	14.3		14.4		14.5
Total (Tier 1 plus Tier 2) capital ratio	14.8		14.9		15.2
Advanced:
CET1 ratio	10.8		10.4		10.6
Tier 1 capital ratio	12.9		12.5		12.6
Total (Tier 1 plus Tier 2) capital ratio	13.2		12.8		13.0

Leverage capital ratio (i)	6.7		6.6		6.6
Supplementary leverage ratio (“SLR”) (i)	6.2		6.1		6.0

BNY Mellon shareholders’ equity to total assets ratio – GAAP	11.3		11.6		11.6
BNY Mellon common shareholders’ equity to total assets ratio – GAAP	10.3		10.5		10.6

Selected regulatory capital ratios – fully phased-in – Non-GAAP: (j)
Estimated CET1 ratio:
Standardized Approach	11.5	%	11.5	%	11.3	%
Advanced Approach	10.4		10.0		9.7

Estimated SLR	6.0		5.9		5.6


(a)	See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 52 for a reconciliation of Non-GAAP measures.


(b)	Non-GAAP information for all periods presented excludes the amortization of intangible assets and M&I, litigation and restructuring charges. Pre-tax operating margin (Non-GAAP) also excludes the net income attributable to noncontrolling interests of consolidated investment management funds.


(c)	Tangible common equity – Non-GAAP and tangible book value per common share – Non-GAAP exclude goodwill and intangible assets, net of deferred tax liabilities. See “Supplemental information – Explanation of GAAP and Non-GAAP financial measures” beginning on page 52 for the reconciliation of Non-GAAP measures.


(d)	See “Average balances and interest rates” on page 11 for a reconciliation of Non-GAAP measures.


(e)	Excludes securities lending cash management assets and assets managed in the Investment Services business.


(f)	Includes the AUC/A of CIBC Mellon Global Securities Services Company (“CIBC Mellon”), a joint venture with the Canadian Imperial Bank of Commerce, of $1.2 trillion at June 30, 2017 and March 31, 2017 and $1.1 trillion at June 30, 2016.


(g)	Represents the total amount of securities on loan in our agency securities lending program managed by the Investment Services business. Excludes securities for which BNY Mellon acts as an agent on behalf of CIBC Mellon clients, which totaled $66 billion at June 30, 2017, $65 billion at March 31, 2017 and $56 billion at June 30, 2016.


(h)	For additional information on our LCR, see “Liquidity and dividends” beginning on page 35.

(i)

For our CET1, Tier 1 capital and Total capital ratios, our effective capital ratios under U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced Approaches. The leverage capital ratio is based on Tier I capital, as phased-in, and quarterly average total assets. The SLR is based on Tier 1 capital, as phased-in, and average quarterly assets and certain off-balance sheet exposures. For additional information on our capital ratios, see “Capital” beginning on page 40.


(j)	The estimated fully phased-in CET1 and SLR ratios (Non-GAAP) are based on our interpretation of the U.S. capital rules, which are being gradually phased-in over a multi-year period. For additional information on these Non-GAAP ratios, see “Capital” beginning on page 40.

BNY Mellon 3

Part I - Financial Information

Items 2. and 3. Management’s Discussion and Analysis of Financial Condition and Results of Operations; Quantitative and Qualitative Disclosures about Market Risk

General

In this Quarterly Report on Form 10-Q, references to “our,” “we,” “us,” “BNY Mellon,” the “Company” and similar terms refer to The Bank of New York Mellon Corporation and its consolidated subsidiaries. The term “Parent” refers to The Bank of New York Mellon Corporation but not its subsidiaries.

Certain business terms used in this report are defined in the Glossary included in our Annual Report on Form 10-K for the year ended Dec. 31, 2016 (“2016 Annual Report”).

The following should be read in conjunction with the Consolidated Financial Statements included in this report. Investors should also read the section titled “Forward-looking Statements.”

How we reported results

Throughout this Form 10-Q, certain measures, which are noted as “Non-GAAP financial measures,” exclude certain items or otherwise include components that differ from U.S. generally accepted accounting principles (“GAAP”). BNY Mellon believes that these measures are useful to investors because they permit a focus on period-to-period comparisons using measures that relate to our ability to enhance revenues and limit expenses in circumstances where such matters are within our control or because they provide additional information about our ability to meet fully phased-in capital requirements. Certain immaterial reclassifications have been made to prior periods to place them on a basis comparable with the current period presentation. See “Supplemental information - Explanation of GAAP and Non-GAAP financial measures” beginning on page 52 for a reconciliation of financial measures presented in accordance with GAAP to adjusted Non-GAAP financial measures. See “Net interest revenue,” including the “Average balances and interest rates” beginning on page 10 for information on measures presented on a fully taxable equivalent basis. Also see “Capital” beginning on page 40 for information on our fully phased-in capital requirements.

Overview

The Bank of New York Mellon Corporation was the first company listed on the New York Stock Exchange (NYSE: BK). With a rich history of maintaining our financial strength and stability through all business cycles, BNY Mellon is a global investments company dedicated to improving lives through investing.

We manage and service assets for financial institutions, corporations and individual investors in 35 countries and more than 100 markets. As of June 30, 2017, BNY Mellon had $31.1 trillion in assets under custody and/or administration (“AUC/A”), and $1.8 trillion in assets under management (“AUM”).

BNY Mellon is focused on enhancing our clients’ experience by leveraging our scale and expertise to deliver innovative and strategic solutions for our clients, and building trusted relationships that drive value. We hold a unique position in the global financial services industry. We service both the buy-side and sell-side, providing us with distinctive marketplace insights that enable us to support our clients’ success.

BNY Mellon’s businesses benefit from global growth in financial assets, the globalization of the investment process, changes in demographics and the continued evolution of the regulatory landscape—each providing us with opportunities to advise and service clients.

Key second quarter 2017 and subsequent events

Charles W. Scharf named chief executive officer; Gerald L. Hassell, chairman, to retire

In July 2017, Charles W. Scharf was appointed chief executive officer and member of the board of directors of the Company. Mr. Scharf succeeds Gerald L. Hassell, who will continue as the Company’s chairman of the board of directors until his retirement at the end of the year. After Mr. Hassell’s retirement, Mr. Scharf will become chairman, effective Jan. 1, 2018.

4 BNY Mellon

Resolution plan

As required by the Dodd-Frank Act, BNY Mellon must submit annually to the Board of Governors of the Federal Reserve System (“Federal Reserve”) and the Federal Deposit Insurance Corporation (“FDIC”) a plan for its rapid and orderly resolution in the event of material financial distress or failure. BNY Mellon filed its 2017 resolution plan on July 1, 2017. We believe the 2017 resolution plan addresses all shortcomings and deficiencies identified by the FDIC and the Federal Reserve in the Company’s 2015 resolution plan. The public portion of our resolution plan is available on the Federal Reserve’s and FDIC’s websites.

Capital plan, share repurchase program and increase in cash dividend on common stock

In June 2017, BNY Mellon received confirmation that the Federal Reserve did not object to our 2017 capital plan submitted in connection with its Comprehensive Capital Analysis and Review (“CCAR”). Our board of directors subsequently approved the repurchase of up to $2.6 billion of common stock and up to an additional $500 million of common stock contingent on a prior issuance of $500 million of noncumulative perpetual preferred stock starting in the third quarter of 2017 and continuing through the second quarter of 2018.

Additionally, in July 2017, the board of directors approved a 26% increase in the quarterly cash dividend on common stock, which was also included in the 2017 capital plan, from $0.19 to $0.24 per share. This increased quarterly cash dividend will be paid on Aug. 11, 2017.

Established BNY Mellon Government Securities Services Corp.

In the second quarter of 2017, BNY Mellon established BNY Mellon Government Securities Services Corp. (“GSS Corp.”) a U.S.-based wholly-owned operating subsidiary that houses the operations and technology supporting our U.S. government securities clearing and settlement and U.S. tri-party repo clearing and settlement services. The board of directors of GSS Corp. provides oversight of business affairs, operational risk and performance, as well as direction on strategic initiatives to drive industry-leading practices and processes. The board currently consists of seven members, including three highly

accomplished industry veterans as independent members.

Established intermediate holding company

In connection with our single point of entry resolution strategy, we have established BNY Mellon IHC, LLC, a wholly-owned direct subsidiary of the Parent, (the “IHC”), to facilitate the provision of capital and liquidity resources to certain key subsidiaries in the event of material financial distress or failure. In the second quarter of 2017, we entered into a binding support agreement that requires the IHC to provide that support. See “Liquidity and dividends” beginning on page 35 for additional information.

Highlights of second quarter 2017 results

We reported net income applicable to common shareholders of $926 million, or $0.88 per diluted common share, in the second quarter of 2017. Net income applicable to common shareholders was $825 million, or $0.75 per diluted common share, in the second quarter of 2016 and $880 million, or $0.83 per diluted common share, in the first quarter of 2017.

Highlights of the second quarter of 2017 include:


•	AUC/A totaled a record $31.1 trillion at June 30, 2017 compared with $29.5 trillion at June 30, 2016. The 5% increase primarily reflects higher market values. (See “Investment Services business” beginning on page 19.)

•

AUM totaled $1.77 trillion at June 30, 2017 compared with $1.66 trillion at June 30, 2016. The 6% increase primarily reflects higher market values and net inflows, partially offset by the unfavorable impact of a stronger U.S. dollar (principally versus the British pound). AUM excludes securities lending cash management assets and assets managed in the Investment Services business. (See “Investment Management business” beginning on page 16.)

•

Investment services fees totaled $1.86 billion, an increase of 4% compared with $1.79 billion in the second quarter of 2016. The increase primarily reflects growth in clearing services fees, net new business, including collateral management solutions, and higher equity market values, partially offset by the unfavorable impact of a stronger U.S. dollar. (See “Investment Services business” beginning on page 19.)

BNY Mellon 5

•

Investment management and performance fees totaled $879 million, an increase of 6% compared with $830 million in the second quarter of 2016. The increase primarily reflects higher market values, money market fees and performance fees, partially offset by the unfavorable impact of a stronger U.S. dollar (principally versus the British pound). (See “Investment Management business” beginning on page 16.)


•	Foreign exchange and other trading revenue totaled $165 million compared with $182 million in the second quarter of 2016. Foreign exchange revenue totaled $151 million, a decrease of 9% compared with $166 million in the second quarter of 2016, primarily reflecting lower volatility, partially offset by higher volumes. (See “Fee and other revenue” beginning on page 7.)


•	Investment and other income totaled $122 million compared with $74 million in the second quarter of 2016. The increase primarily reflects lease-related gains. (See “Fee and other revenue” beginning on page 7.)

•

Net interest revenue totaled $826 million compared with $767 million in the second quarter of 2016. The 8% increase was primarily driven by higher interest rates and lower premium amortization, partially offset by lower interest-earning assets and higher average long-term debt. Net interest margin was 1.14% in the second quarter of 2017 compared with 0.97% in the second quarter of 2016 and net interest margin (FTE) (Non-GAAP) was 1.16% in the second quarter of 2017 compared with 0.98% in the second quarter of 2016. (See “Net interest revenue” on page 10.)


•	The provision for credit losses was a credit of $7 million in the second quarter of 2017 and a credit of $9 million in the second quarter of 2016. (See “Asset quality and allowance for credit losses” beginning on page 31.)

•

Noninterest expense totaled $2.66 billion compared with $2.62 billion in the second quarter of 2016. The increase reflects higher professional, legal and other purchased services (related to regulatory and compliance costs, including the 2017 resolution plan), software and litigation expenses, partially offset by the favorable impact of a stronger U.S. dollar and lower net occupancy expense. (See “Noninterest expense” beginning on page 13.)


•	The provision for income taxes was $332 million and the effective rate was 25.4% in the second quarter of 2017 compared with an income tax provision of $290 million and an effective tax rate of 24.9% in the second quarter of 2016. (See “Income taxes” on page 14.)


•	The net unrealized pre-tax gain on the total investment securities portfolio was $151 million at June 30, 2017 compared with a pre-tax loss of $23 million at March 31, 2017. The net unrealized pre-tax gain was primarily driven by a decrease in market interest rates. (See “Investment securities” beginning on page 26.)


•	Our CET1 ratio under the Advanced Approach was 10.8% at June 30, 2017 and 10.4% at March 31, 2017. The increase was primarily driven by CET1 generation. Our CET1 ratio under the Standardized Approach was 12.0% at both June 30, 2017 and March 31, 2017. (See “Capital” beginning on page 40.)

•

Our estimated CET1 ratio (Non-GAAP) calculated under the Advanced Approach on a fully phased-in basis was 10.4% at June 30, 2017 and 10.0% at March 31, 2017. The increase primarily reflects CET1 generation. Our estimated CET1 ratio (Non-GAAP) calculated under the Standardized Approach on a fully phased-in basis was 11.5% at both June 30, 2017 and March 31, 2017. (See “Capital” beginning on page 40.)

6 BNY Mellon

Fee and other revenue



Fee and other revenue																				YTD17
										2Q17 vs.										vs.
(dollars in millions, unless otherwise noted)	2Q17			1Q17			2Q16			1Q17		2Q16		YTD17			YTD16			YTD16
Investment services fees:
Asset servicing (a)	$	1,085		$	1,063		$	1,069		2	%	1	%	$	2,148		$	2,109		2	%
Clearing services	394			376			350			5		13		770			700			10
Issuer services	241			251			234			(4	)	3		492			478			3
Treasury services	140			139			139			1		1		279			270			3
Total investment services fees	1,860			1,829			1,792			2		4		3,689			3,557			4
Investment management and performance fees	879			842			830			4		6		1,721			1,642			5
Foreign exchange and other trading revenue	165			164			182			1		(9	)	329			357			(8	)
Financing-related fees	53			55			57			(4	)	(7	)	108			111			(3	)
Distribution and servicing	41			41			43			—		(5	)	82			82			—
Investment and other income	122			77			74			N/M		N/M		199			179			N/M
Total fee revenue	3,120			3,008			2,978			4		5		6,128			5,928			3
Net securities gains	—			10			21			N/M		N/M		10			41			N/M
Total fee and other revenue	$	3,120		$	3,018		$	2,999		3	%	4	%	$	6,138		$	5,969		3	%

Fee revenue as a percentage of total revenue	79		%	78		%	79		%					79		%	79		%

AUM at period end (in billions) (b)	$	1,771		$	1,727		$	1,664		3	%	6	%	$	1,771		$	1,664		6	%
AUC/A at period end (in trillions) (c)	$	31.1		$	30.6		$	29.5		2	%	5	%	$	31.1		$	29.5		5	%


(a)	Asset servicing fees include securities lending revenue of $48 million in the second quarter of 2017, $49 million in the first quarter of 2017 and $52 million in the second quarter of 2016.


(b)	Excludes securities lending cash management assets and assets managed in the Investment Services business.


(c)	Includes the AUC/A of CIBC Mellon of $1.2 trillion at June 30, 2017 and March 31, 2017 and $1.1 trillion at June 30, 2016.

N/M - Not meaningful.

Fee and other revenue increased 4% compared with the second quarter of 2016 and 3% (unannualized) compared with the first quarter of 2017. Both increases primarily reflect higher investment management and performance fees, investment and other income and clearing services fees. The increase compared with the second quarter of 2016 was partially offset by lower foreign exchange and other trading revenue.

Investment services fees

Investment services fees were impacted by the following compared with the second quarter of 2016 and the first quarter of 2017:

•

Asset servicing fees increased 1% compared with the second quarter of 2016 and 2% (unannualized) compared with the first quarter of 2017. Both increases primarily reflect net new business, including growth of collateral management solutions, and higher equity market values. The increase compared with the second quarter of 2016 was partially offset by the unfavorable impact of a stronger U.S. dollar and

the impact of downsizing the retail UK transfer agency business.


•	Clearing services fees increased 13% compared with the second quarter of 2016 and 5% (unannualized) compared with the first quarter of 2017. Both increases were primarily driven by higher money market fees and growth in long-term mutual fund assets.


•	Issuer services fees increased 3% compared with the second quarter of 2016 and decreased 4% (unannualized) compared with the first quarter of 2017. The increase primarily reflects higher Depositary Receipts revenue. The decrease primarily reflects seasonality in Depositary Receipts revenue.


•	Treasury services fees increased 1% compared with both the second quarter of 2016 and first quarter of 2017. Both increases primarily reflect higher payment volumes, partially offset by higher compensating balance credits provided to clients, which reduces fee revenue and increases net interest revenue.

BNY Mellon 7

See the “Investment Services business” in “Review of businesses” for additional details.

Investment management and performance fees

Investment management and performance fees increased 6% compared with the second quarter of 2016 and 4% (unannualized) compared with the first quarter of 2017. Both increases primarily reflect higher market values, money market fees and performance fees. The increase compared with the second quarter of 2016 was partially offset by the unfavorable impact of a stronger U.S. dollar (principally versus the British pound). On a constant currency basis, investment management and performance fees increased 9% (Non-GAAP) compared with the second quarter of 2016. Performance fees were $17 million in the second quarter of 2017, $9 million in the second quarter of 2016 and $12 million in the first quarter of 2017.

Total AUM for the Investment Management business increased 6% compared with June 30, 2016 and 3% compared with March 31, 2017. The increase compared with June 30, 2016 primarily reflects higher market values and net inflows, partially offset by the unfavorable impact of a stronger U.S. dollar (principally versus the British pound). The increase compared with March 31, 2017 primarily reflects the favorable impact of the weaker U.S. dollar (principally versus the British pound) and net inflows. Net long-term inflows of $3 billion in the second quarter of 2017 primarily reflect inflows of liability-driven and fixed income investments, partially offset by outflows of index investments. Net short-term inflows of $11 billion in the second quarter of 2017 were a result of increased distribution through our liquidity portals.

See the “Investment Management business” in “Review of businesses” for additional details regarding the drivers of investment management and performance fees.

Foreign exchange and other trading revenue



Foreign exchange and other trading revenue
(in millions)	2Q17		1Q17		2Q16		YTD17		YTD16
Foreign exchange	$	151	$	154	$	166	$	305	$	337
Other trading revenue	14		10		16		24		20
Total foreign exchange and other trading revenue	$	165	$	164	$	182	$	329	$	357

Foreign exchange and other trading revenue decreased 9% compared with the second quarter of 2016 and increased 1% (unannualized) compared with the first quarter of 2017.

Foreign exchange revenue is primarily driven by the volume of client transactions and the spread realized on these transactions, both of which are impacted by market volatility, and the impact of foreign currency hedging activities. Foreign exchange revenue decreased 9% compared with the second quarter of 2016 and 2% (unannualized) compared with the first quarter of 2017. Both decreases primarily reflect lower volatility, partially offset by higher volumes. Foreign exchange revenue is primarily reported in the Investment Services business and, to a lesser extent, the Investment Management business and the Other segment.

Our custody clients may enter into foreign exchange transactions in a number of ways, including through our standing instruction programs. While the shift of custody clients from our standing instruction programs to other trading options has recently abated, our foreign exchange revenue continues to be impacted by changes in volume and volatility. For the quarter ended June 30, 2017, our total revenue for all types of foreign exchange trading transactions was $151 million, or 4% of our total revenue, and approximately 29% of our foreign exchange revenue was generated by transactions in our standing instruction programs.

Financing-related fees

Financing-related fees, which are primarily reported in the Investment Services business and the Other segment, include capital markets fees, loan commitment fees and credit-related fees. Financing-related fees decreased compared with both the second quarter of 2016 and first quarter of 2017, primarily reflecting lower underwriting fees.

Distribution and servicing fees

Distribution and servicing fees decreased compared with the second quarter of 2016 primarily reflecting fees paid to introducing brokers, partially offset by higher money market fees.

8 BNY Mellon

Investment and other income



Investment and other income
(in millions)	2Q17			1Q17			2Q16			YTD17			YTD16
Corporate/bank-owned life insurance	$	43		$	30		$	31		$	73		$	62
Lease-related gains	51			1			—			52			44
Equity investment income (loss)	7			26			(4		)	33			(7		)
Expense reimbursements from joint venture	17			14			17			31			34
Seed capital gains (a)	10			9			11			19			22
Asset-related (losses) gains	(5		)	3			1			(2		)	1
Other (loss) income	(1		)	(6		)	18			(7		)	23
Total investment and other income	$	122		$	77		$	74		$	199		$	179

(a)

Excludes the gains (losses) on seed capital investments in consolidated investment management funds which are reflected in operations of consolidated investment management funds, net of noncontrolling interests. The gains on seed capital investments in consolidated investment management funds were $7 million in the second quarter of 2017, $15 million in the first quarter of 2017, $6 million in the second quarter of 2016, $22 million in the first six months of 2017 and $7 million in the first six months of 2016.

Investment and other income increased compared with both the second quarter of 2016 and first quarter of 2017, primarily reflecting lease-related gains and higher income from corporate/bank-owned life insurance. The increase compared with the second quarter of 2016 was partially offset by the negative impact of foreign exchange translation and lower other income driven by losses on our investments in renewable energy. The pre-tax losses on the

renewable energy investments are offset by corresponding tax benefits and credits recorded as a reduction to the provision for income taxes. The increase in investment and other income compared with the first quarter of 2017 was partially offset by a net gain related to an equity investment recorded in the first quarter of 2017.

Year-to-date 2017 compared with year-to-date 2016

Fee and other revenue increased 3% in the first six months of 2017 compared with the first six months of 2016, primarily reflecting higher investment management and performance fees, clearing services fees and asset servicing fees, partially offset by lower net securities gains and foreign exchange and other trading revenue. The 5% increase in investment management and performance fees primarily reflects higher market values and performance fees, partially offset by the unfavorable impact of a stronger U.S. dollar (principally versus the British pound). The 10% increase in clearing services fees primarily reflects higher money market fees and growth in long-term mutual fund assets. The 2% increase in asset servicing fees primarily reflects net new business, including growth of collateral management solutions and higher equity market values, partially offset by the unfavorable impact of a stronger U.S. dollar and the impact of downsizing the retail UK transfer agency business. The 8% decrease in foreign exchange and other trading revenue primarily reflects lower volatility.

BNY Mellon 9

Net interest revenue



Net interest revenue																				YTD17
										2Q17 vs.										vs.
(dollars in millions)	2Q17			1Q17			2Q16			1Q17		2Q16		YTD17			YTD16			YTD16
Net interest revenue	$	826		$	792		$	767		4%		8%		$	1,618		$	1,533		6%
Tax equivalent adjustment	12			12			13			N/M		N/M		24			27			N/M
Net interest revenue (FTE) – Non-GAAP (a)	$	838		$	804		$	780		4%		7%		$	1,642		$	1,560		5%

Average interest-earning assets	$	289,496		$	283,421		$	318,433		2%		(9)%		$	286,475		$	314,556		(9)%

Net interest margin	1.14		%	1.13		%	0.97		%	1	bps	17	bps	1.14		%	0.98		%	16	bps
Net interest margin (FTE) – Non-GAAP (a)	1.16		%	1.14		%	0.98		%	2	bps	18	bps	1.15		%	1.00		%	15	bps


(a)	Net interest revenue (FTE) – Non-GAAP and net interest margin (FTE) – Non-GAAP include the tax equivalent adjustments on tax-exempt income which allows for comparisons of amounts arising from both taxable and tax-exempt sources and is consistent with industry practice. The adjustment to an FTE basis has no impact on net income.

FTE - fully taxable equivalent.

N/M - Not meaningful.

bps - basis points.

Net interest revenue increased 8% compared with the second quarter of 2016 and 4% (unannualized) compared with the first quarter of 2017. Both increases primarily reflect higher interest rates. The increase compared with the second quarter of 2016 also reflects lower premium amortization, partially offset by lower interest-earning assets and higher average long-term debt. The increase compared with the first quarter of 2017 also reflects an additional interest-earning day and higher interest-earning assets.

Net interest margin increased 17 basis points compared with the second quarter of 2016, primarily reflecting higher interest rates and lower interest-earning assets.

Average non-U.S. dollar deposits comprised approximately 25% of our average total deposits in the second quarter of 2017. Approximately 45% of the average non-U.S. dollar deposits in the second quarter of 2017 were euro-denominated.

Year-to-date 2017 compared with year-to-date 2016

Net interest revenue increased 6% in the first six months of 2017 compared with the first six months of 2016. The increase was primarily driven by higher interest rates and lower premium amortization, partially offset by lower interest-earning assets and higher average long-term debt. The increase in the net interest margin was primarily driven by the factors listed above.

10 BNY Mellon



Average balances and interest rates	Quarter ended
	June 30, 2017							March 31, 2017								June 30, 2016
(dollar amounts in millions, presented on an FTE basis)	Average balance			Interest		Average rates		Average balance			Interest			Average rates		Average balance			Interest		Average rates
Assets
Interest-earning assets:
Interest-bearing deposits with banks (primarily foreign banks)	$	14,832		$	27	0.73	%	$	14,714		$	22		0.60	%	$	14,394		$	24	0.68	%
Interest-bearing deposits held at the Federal Reserve and other central banks	69,316			71		0.41		66,043			57			0.35		97,788			72		0.30
Federal funds sold and securities purchased under resale agreements	26,873			86		1.29		25,312			67			1.07		25,813			56		0.87
Margin loans	15,058			87		2.32		15,753			75			1.94		18,226			64		1.40
Non-margin loans:
Domestic offices	30,734			207		2.70		30,963			188			2.44		29,413			165		2.25
Foreign offices	13,001			65		1.99		13,596			57			1.71		12,645			49		1.57
Total non-margin loans	43,735			272		2.49		44,559			245			2.22		42,058			214		2.04
Securities:
U.S. Government obligations	25,928			106		1.64		26,239			104			1.60		24,571			92		1.50
U.S. Government agency obligations	59,533			290		1.95		56,857			271			1.90		56,050			236		1.68
State and political subdivisions – tax-exempt	3,298			26		3.09		3,373			26			3.11		3,778			28		2.90
Other securities	28,468			81		1.15		28,317			88			1.25		33,603			104		1.24
Trading securities	2,455			18		2.85		2,254			17			3.12		2,152			13		2.45
Total securities	119,682			521		1.74		117,040			506			1.74		120,154			473		1.57
Total interest-earning assets (a)	$	289,496		$	1,064	1.47	%	$	283,421		$	972		1.38	%	$	318,433		$	903	1.14	%
Allowance for loan losses	(164		)					(169		)						(163		)
Cash and due from banks	4,972							5,097								4,141
Other assets	47,303							46,731								50,563
Assets of consolidated investment management funds	908							1,120								1,246
Total assets	$	342,515						$	336,200							$	374,220
Liabilities
Interest-bearing liabilities:
Interest-bearing deposits:
Money market rate accounts	$	7,379		$	1	0.04	%	$	7,510		$	1		0.05	%	$	7,280		$	1	0.06	%
Savings	1,014			2		0.75		1,094			2			0.61		1,175			1		0.39
Demand deposits	5,659			2		0.14		5,371			1			0.12		1,790			2		0.40
Time deposits	34,757			15		0.18		35,429			11			0.12		46,629			6		0.06
Foreign offices	93,527			12		0.05		90,416			(6		)	(0.03	)	108,248			2		0.01
Total interest-bearing deposits	142,336			32		0.09		139,820			9			0.03		165,122			12		0.03
Federal funds purchased and securities sold under repurchase agreements	17,970			38		0.84		18,995			24			0.51		18,204			13		0.28
Trading liabilities	1,216			2		0.61		908			2			0.89		662			1		0.66
Other borrowed funds	1,193			4		1.24		822			2			0.98		847			2		0.97
Commercial paper	2,215			5		0.95		2,164			5			0.88		3,781			4		0.37
Payables to customers and broker-dealers	20,609			16		0.30		18,961			7			0.16		16,935			2		0.05
Long-term debt	27,398			129		1.87		25,882			119			1.85		22,838			89		1.54
Total interest-bearing liabilities	$	212,937		$	226	0.42	%	$	207,552		$	168		0.33	%	$	228,389		$	123	0.21	%
Total noninterest-bearing deposits	73,886							73,555								84,033
Other liabilities	15,545							15,600								22,345
Liabilities and obligations of consolidated investment management funds	111							244								253
Total liabilities	302,479							296,951								335,020
Temporary equity
Redeemable noncontrolling interests	172							161								181
Permanent equity
Total BNY Mellon shareholders’ equity	39,404							38,507								38,379
Noncontrolling interests	460							581								640
Total permanent equity	39,864							39,088								39,019
Total liabilities, temporary equity and permanent equity	$	342,515						$	336,200							$	374,220
Net interest revenue (FTE) – Non-GAAP				$	838						$	804							$	780
Net interest margin (FTE) – Non-GAAP						1.16	%							1.14	%						0.98	%
Less: Tax equivalent adjustment (b)				12							12								13
Net interest revenue – GAAP				$	826						$	792							$	767
Net interest margin – GAAP						1.14	%							1.13	%						0.97	%


Note:	Interest and average rates were calculated on a taxable equivalent basis using dollar amounts in thousands and actual number of days in the year.


(a)	Interest income and average yield are presented on an FTE basis (Non-GAAP).


(b)	Based on the applicable tax rate of 35%.

BNY Mellon 11



Average balances and interest rates	Year-to-date
	June 30, 2017							June 30, 2016
(dollar amounts in millions, presented on an FTE basis)	Average balance			Interest		Average rates		Average balance			Interest		Average rates
Assets
Interest-earning assets:
Interest-bearing deposits with banks (primarily foreign banks)	$	14,773		$	49	0.66	%	$	14,651		$	50	0.68	%
Interest-bearing deposits held at the Federal Reserve and other central banks	67,689			128		0.38		93,440			133		0.29
Federal funds sold and securities purchased under resale agreements	26,097			153		1.18		24,718			105		0.85
Margin loans	15,403			162		2.12		18,566			127		1.37
Non-margin loans:
Domestic offices	30,848			395		2.57		28,960			322		2.23
Foreign offices	13,297			122		1.85		13,214			97		1.48
Total non-margin loans	44,145			517		2.35		42,174			419		2.00
Securities:
U.S. Government obligations	26,083			210		1.62		24,526			184		1.50
U.S. Government agency obligations	58,202			561		1.93		56,008			487		1.74
State and political subdivisions – tax-exempt	3,335			52		3.10		3,879			57		2.89
Other securities	28,393			169		1.20		33,858			207		1.23
Trading securities	2,355			35		2.98		2,736			31		2.28
Total securities	118,368			1,027		1.74		121,007			966		1.60
Total interest-earning assets (a)	$	286,475		$	2,036	1.43	%	$	314,556		$	1,800	1.15	%
Allowance for loan losses	(167		)					(160		)
Cash and due from banks	5,035							4,010
Other assets	47,019							49,704
Assets of consolidated investment management funds	1,013							1,277
Total assets	$	339,375						$	369,387
Liabilities
Interest-bearing liabilities:
Interest-bearing deposits:
Money market rate accounts	$	7,444		$	2	0.05	%	$	7,332		$	2	0.06	%
Savings	1,054			4		0.68		1,205			2		0.33
Demand deposits	5,515			3		0.13		1,327			3		0.43
Time deposits	35,091			26		0.15		44,653			10		0.05
Foreign offices	91,980			6		0.01		109,052			10		0.02
Total interest-bearing deposits	141,084			41		0.06		163,569			27		0.03
Federal funds purchased and securities sold under repurchase agreements	18,480			62		0.67		18,446			22		0.24
Trading liabilities	1,063			4		0.73		606			3		1.01
Other borrowed funds	1,009			6		1.13		803			4		0.97
Commercial paper	2,190			10		0.91		1,902			4		0.37
Payables to customers and broker-dealers	19,789			23		0.23		16,868			6		0.07
Long-term debt	26,644			248		1.86		22,197			174		1.56
Total interest-bearing liabilities	$	210,259		$	394	0.38	%	$	224,391		$	240	0.21	%
Total noninterest-bearing deposits	73,721							83,489
Other liabilities	15,573							22,323
Liabilities and obligations of consolidated investment management funds	177							256
Total liabilities	299,730							330,459
Temporary equity
Redeemable noncontrolling interests	167							186
Permanent equity
Total BNY Mellon shareholders’ equity	38,958							38,091
Noncontrolling interests	520							651
Total permanent equity	39,478							38,742
Total liabilities, temporary equity and permanent equity	$	339,375						$	369,387
Net interest revenue (FTE) – Non-GAAP				$	1,642						$	1,560
Net interest margin (FTE) – Non-GAAP						1.15	%						1.00	%
Less: Tax equivalent adjustment (b)				24							27
Net interest revenue – GAAP				$	1,618						$	1,533
Net interest margin – GAAP						1.14	%						0.98	%


Note:	Interest and average rates were calculated on a taxable equivalent basis using dollar amounts in thousands and actual number of days in the year.


(a)	Interest income and average yield are presented on an FTE basis (Non-GAAP).


(b)	Based on the applicable tax rate of 35%.

12 BNY Mellon

Noninterest expense



Noninterest expense																				YTD17
										2Q17 vs.										vs.
(dollars in millions)	2Q17			1Q17			2Q16			1Q17		2Q16		YTD17			YTD16			YTD16
Staff	$	1,417		$	1,472		$	1,412		(4	)%	—	%	$	2,889		$	2,871		1	%
Professional, legal and other purchased services	319			312			290			2		10		631			568			11
Software	173			166			160			4		8		339			314			8
Net occupancy	139			136			152			2		(9	)	275			294			(6	)
Distribution and servicing	104			100			102			4		2		204			202			1
Sub-custodian	65			64			70			2		(7	)	129			129			—
Furniture and equipment	59			57			63			4		(6	)	116			128			(9	)
Bank assessment charges (a)	59			57			52			4		13		116			105			10
Business development	63			51			65			24		(3	)	114			122			(7	)
Other (a)	192			167			188			15		2		359			376			(5	)
Amortization of intangible assets	53			52			59			2		(10	)	105			116			(9	)
M&I, litigation and restructuring charges	12			8			7			N/M		N/M		20			24			N/M
Total noninterest expense – GAAP	$	2,655		$	2,642		$	2,620		—	%	1	%	$	5,297		$	5,249		1	%

Staff expense as a percentage of total revenue	36		%	38		%	37		%					37		%	38		%

Full-time employees at period end	52,800			52,600			52,200			—	%	1	%	52,800			52,200			1	%

Memo:
Adjusted total noninterest expense excluding amortization of intangible assets and M&I, litigation and restructuring charges – Non-GAAP	$	2,590		$	2,582		$	2,554		—	%	1	%	$	5,172		$	5,109		1	%


(a)	In the first quarter of 2017, we began disclosing bank assessment charges on a quarterly basis. The bank assessment charges were previously included in other expense. All prior periods were reclassified.

N/M - Not meaningful.

Total noninterest expense increased 1% compared with the second quarter of 2016 and less than 1% (unannualized) compared with the first quarter of 2017. The increase compared with the second quarter of 2016 primarily reflects higher professional, legal and other purchased services, software and litigation expenses, partially offset by the favorable impact of a stronger U.S. dollar and lower net occupancy expense. The increase compared with the first quarter of 2017 primarily reflects higher other, business development and software expenses, partially offset by lower staff expense. Excluding amortization of intangible assets and M&I, litigation and restructuring charges, total noninterest expense, as adjusted (Non-GAAP), increased 1% compared with the second quarter of 2016 and less than 1% (unannualized) compared with the first quarter of 2017.

We continue to invest in our risk management, regulatory compliance and other control functions to improve our safety and soundness and in light of increasing global regulatory requirements. We expect a modest decrease in the run rate of the expenses relating to these functions in the second half of 2017

as a result of the submission of our 2017 resolution plan.

Staff expense

Given our mix of fee-based businesses, which are staffed with high-quality professionals, staff expense comprised 53% of total noninterest expense in the second quarter of 2017, 54% in the second quarter of 2016 and 56% in the first quarter of 2017.

Staff expense increased slightly compared with the second quarter of 2016 and decreased 4% (unannualized) compared with the first quarter of 2017. The increase compared with the second quarter of 2016 was partially offset by the favorable impact of a stronger U.S. dollar. The decrease compared with the first quarter of 2017 was primarily driven by the impact of vesting of long-term stock awards for retirement eligible employees recorded in the first quarter of 2017.

Non-staff expense

Non-staff expense includes certain expenses that vary with the levels of business activity and levels of

BNY Mellon 13

expensed business investments, fixed infrastructure costs and expenses associated with corporate activities related to technology, compliance, legal, productivity initiatives and business development.

Non-staff expense totaled $1.2 billion in the second quarter of 2017, an increase of 2% compared with the second quarter of 2016 and 6% (unannualized) compared with the first quarter of 2017. The increase compared with the second quarter of 2016 primarily reflects higher professional, legal and other purchased services expense related to regulatory and compliance costs, including the 2017 resolution plan, and higher software and litigation expenses. The increase was partially offset by lower net occupancy expense as we continue to benefit from the savings generated by the business improvement process. The increase compared with the first quarter of 2017 primarily reflects higher other, business development and software expenses.

Year-to-date 2017 compared with year-to-date 2016

Noninterest expense totaled $5.3 billion in the first six months of 2017, a 1% increase compared with the first six months of 2016. The increase primarily reflects higher consulting and software expenses, partially offset by the favorable impact of a stronger U.S. dollar and lower net occupancy and other expenses. The increase in consulting expenses primarily reflects higher regulatory and compliance costs. Net occupancy expense decreased as we continue to benefit from the savings generated by the business improvement process.

Income taxes

BNY Mellon recorded an income tax provision of $332 million (25.4% effective tax rate) in the second quarter of 2017. The income tax provision was $290 million (24.9% effective tax rate) in the second quarter of 2016 and $269 million (22.3% effective tax rate) in the first quarter of 2017. The lower effective tax in the first quarter of 2017 reflects an approximate 3% benefit related to applying the new accounting guidance required in ASU 2016-09, Compensation – Stock Compensation, to the annual vesting of stock awards and our stock price appreciating above the awards’ original grant price.

For additional information, see Note 10 of the Notes to Consolidated Financial Statements.

We expect the effective tax rate to be approximately 25-26% in 2017 based on current income tax rates.

Any legislation affecting income tax rates could have an impact on our future effective tax rate, the significance of which would depend on the timing, nature and scope of any such legislation, as well as the level and composition of our earnings.

Review of businesses

We have an internal information system that produces performance data along product and service lines for our two principal businesses and the Other segment.

Business accounting principles

Our business data has been determined on an internal management basis of accounting, rather than the generally accepted accounting principles used for consolidated financial reporting. These measurement principles are designed so that reported results of the businesses will track their economic performance.

For information on the accounting principles of our businesses, the primary types of revenue by business and how our businesses are presented and analyzed, see Note 18 of the Notes to Consolidated Financial Statements.

Business results are subject to reclassification when organizational changes are made or when improvements are made in the measurement principles.

The results of our businesses may be influenced by client and other activities that vary by quarter. In the first quarter, incentive expense typically increases reflecting the vesting of long-term stock awards for retirement eligible employees. In the third quarter, Depositary Receipts revenue is typically higher due to an increased level of client dividend payments. In the third quarter of 2017, we expect seasonally higher Depositary Receipts revenue, but at a reduced amount compared with historical levels due to the market environment. Also in the third quarter, volume-related fees may decline due to reduced client activity. In the third quarter, staff expense typically increases reflecting the annual employee merit increase. In the fourth quarter, we typically incur higher business development and marketing expenses. In our Investment Management business, performance fees are typically higher in the fourth

14 BNY Mellon

quarter, as the fourth quarter represents the end of the measurement period for many of the performance fee-eligible relationships.

The results of our businesses may also be impacted by the translation of financial results denominated in foreign currencies to the U.S. dollar. We are primarily impacted by activities denominated in the British pound and the euro. On a consolidated basis and in our Investment Services business, we typically

have more foreign currency denominated expenses than revenues. However, our Investment Management business typically has more foreign currency denominated revenues than expenses. Overall, currency fluctuations impact the year-over-year growth rate in the Investment Management business more than the Investment Services business. However, currency fluctuations, in isolation, are not expected to significantly impact net income on a consolidated basis.

The following table presents key market metrics at period end and on an average basis.



Key market metrics										YTD17
						2Q17 vs.				vs.
	2Q17	1Q17	4Q16	3Q16	2Q16	1Q17	2Q16	YTD17	YTD16	YTD16
Standard & Poor’s (“S&P”) 500 Index (a)	2423	2363	2239	2168	2099	3 %	15 %	2423	2099	15 %
S&P 500 Index – daily average	2398	2326	2185	2162