U.S. stocks rallied in the second quarter, with the S&P 500 (.SPX) and the Nasdaq posting their biggest gains since 2020 as investors looked past volatility sparked by renewed conflict in the Middle East and AI-related swings in technology stocks.
"It's an active period for markets, a lot of things going on," CEO Robin Vince told Reuters. "The fundamental drivers of capital markets have been broadly constructive. Corporate earnings have been resilient."
The custodian bank's net interest income (NII) - the spread between earnings from assets and costs on liabilities - surged 20% in the second quarter. Its revenue jumped 13% to a record $5.7 billion.
BNY now expects full-year revenue to grow between 10% and 11% versus its prior outlook of about 5%. Analysts on average were expecting 7.8%, according to estimates compiled by LSEG.
MARKETS BOOST
The results reinforce a theme emerging across the financial sector this earnings season: buoyant markets are lifting fee income. For custodian banks, rising asset values expand the pool of assets on which fees are charged, while increased client trading boosts transaction revenue.
BNY's assets under custody and administration climbed 12% in the quarter to $62.6 trillion. Its assets under management increased 6% to $2.2 trillion.
"We'll see what happens with the rest of this quarter's corporate earnings, because we're just at the beginning of that cycle, but if they do come out strong and they are expected to, then that supports valuations in a pretty significant way," Vince said.
"So there's plenty of room probably under that scenario for the stock market."
Its total fee revenue jumped 11% to $4.04 billion in the three months ended June 30. BNY said the increase reflected net new business as well as higher market values and client activity.
Wall Street banks kicked off the quarterly earnings season this week, with investors looking to the results in the coming weeks for clues about the health of corporate America and whether earnings growth can continue to support the market's advance.
SECURITIES SERVICES SHINES
The bank's asset servicing business, which handles the safekeeping and settlement of trades, posted a 12% rise in revenue. Meanwhile, its issuer services segment, which supports clients issuing securities, reported a 23% increase.
Custodian banks are a cornerstone of global financial markets, safeguarding and administering trillions of dollars in client assets while processing trades and moving securities and cash between financial institutions.
BNY posted net income applicable to common shareholders of $1.7 billion, or $2.45 per share, for the second quarter. That compares with $1.4 billion, or $1.93 per share, a year earlier.
Shares of the oldest U.S. bank have surged 33% so far this year, handily outperforming the equities benchmark S&P 500.
