By Andrew Welsch
First Republic Bank collapsed a year ago, but the fallout is still being felt in the wealth management industry.
Case in point: Bank of New York Mellon's Pershing. Pershing reported net asset outflows of $2 billion during the first quarter, its second consecutive quarter of outflows. Pershing provides custody and clearing services to wealth management firms and other institutions, and one of its customers was First Republic.
San Francisco-based First Republic provided private banking and wealth management services to wealthy customers. During last year's regional bank crisis, First Republic hemorrhaged deposits and was one of three lenders to collapse. JPMorgan Chase bought the troubled regional bank in May 2023 and it has been steadily moving client assets from First Republic to its in-house custodian.
A BNY Mellon spokesman declined to comment on First Republic. During BNY Mellon's earnings call, executives referred to "the impact of business lost in the prior year" and that the "deconversion" of a business will be largely done by the third quarter of this year.
Pershing's first-quarter revenue grew nonetheless, increasing 3% year over year to $670 million, according to BNY Mellon's earnings report issued Tuesday. The bank reported total revenue of $4.5 billion, up 3%. Shares of BNY Mellon are up 4% this year compared with a 5.89% gain for the S&P 500.
BNY Mellon executives struck an optimistic tone when discussing Pershing. They said that the bank has been investing in Pershing's technology and that Pershing is winning both new clients and drumming up more business with existing customers. For example, during the first quarter, the company said it added Ashton Thomas Securities, an independent broker-dealer and registered investment advisor, as a client. Ashton Thomas will use clearing and custody services from Pershing and BNY Mellon Precision Direct Indexing capabilities from the bank's investment management division, according to BNY Mellon.
"As we've said since the deconversion was announced, we're going to earn our way out of this situation, and that's what's happening," CFO Dermot William McDonogh said during BNY Mellon's earnings call on April 17. "So we still, as a business, feel very good about Pershing and our ability. It's a market that's growing in mid-single digits on an annual basis and we're a big player in that market."
Pershing is one the nation's largest custodians of assets for registered investment advisory firms, with the other two being Charles Schwab and Fidelity.
CEO Robin Vince said that Pershing is benefiting from ongoing consolidation trends within the registered investment advisor sector. "Our clients are growing with us, and we also are on the receiving end of roll-ups as well," Vince said. "Our clients are quite acquisitive, and we have a couple of clients who've been doing acquisitions, and we have some of our largest clients who are growing very significantly and very healthfully," Vince said. "So it's always unfortunate when there's a roll-up that goes against us, but when there are roll-ups that go with our clients, those things balance out to some extent, which is why Dermot makes the point about overall, we still feel quite enthusiastic about the net new assets growth over time."
Pershing reported first-quarter revenue of $670 million, up 3% from the same period a year ago. The unit's assets under custody and administration rose 8% year over year to $2.6 trillion, lifted in part by higher equity markets.
JPMorgan reported wealth management client assets reached a record $3.3 trillion, up 30%.
BNY Mellon reported first-quarter earnings per share that beat analysts' forecasts: $1.25 per share compared with consensus of $1.19. Earnings were up 11% year over year, according to the company.
Write to Andrew Welsch at andrew.welsch@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 17, 2024 17:02 ET (21:02 GMT)
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