4Q22 Financial Highlights J A N U A R Y 1 3 , 2 0 2 3
2 2022 Financial Highlights Revenue Pre-tax income Pre-tax margin Returns Capital ratios T1L: 5.8% CET1: 11.2% • Revenue up 3% YoY, up 6%(a) excluding the impact of notable items – Fee revenue flat YoY – Net interest revenue up 34% YoY • Expense up 13% YoY, up 5%(a) excluding the impact of notable items, and up 8%(a) excluding the impact of notable items and currency translation • Provision for credit losses was $39mm compared with a provision benefit of $231mm in 2021 • Returned $1.3bn to common shareholders • Board of Directors authorized a new $5bn common equity share repurchase program, effective January 1, 2023 EPS (a) (b) Reported Excluding notable items $16.9bn Reported ReportedReported Reported (a) (a) (a) (a) (a) Excluding notable items Excluding notable items Excluding notable items Excluding notable items $16.4bn 29%20% ROE: 6.5% ROTCE: 13.4% 10.3% 21.0% $2.90 $4.59 $3.3bn $4.9bn (a) Represents a non-GAAP measure. See pages 16, 17 and 18 in the Appendix for the corresponding reconciliations of the non-GAAP measures of revenue, revenue growth, expense growth, pre-tax income, earnings per share, pre-tax margin, ROE and ROTCE excluding notable items and expense growth excluding notable items and currency translation. (b) Represents a non-GAAP measure. See page 15 in the Appendix for the corresponding reconciliation of the non-GAAP measure of ROTCE.
3 4Q22 vs. $mm, except per share data or unless otherwise noted 4Q22 3Q22 4Q21 3Q22 4Q21 Fee revenue $3,222 $3,236 $3,231 —% —% Investment and other revenue (360) 117 107 N/M N/M Net interest revenue 1,056 926 677 14% 56% Total revenue $3,918 $4,279 $4,015 (8)% (2)% Provision for credit losses 20 (30) (17) N/M N/M Noninterest expense 3,213 3,679 2,967 (13)% 8% Income before income taxes $685 $630 $1,065 9% (36)% Net income applicable to common shareholders $509 $319 $822 60% (38)% EPS $0.62 $0.39 $1.01 59% (39)% Avg. common shares and equivalents outstanding (mm) – diluted 816 815 817 —% —% Operating leverage(a) 423 bps N/M Pre-tax margin 17% 15% 27% ROE 5.7% 3.5% 8.6% ROTCE(b) 11.5% 7.5% 17.2% Increase / (decrease) Revenue Expense EPS 4Q22 (460) 213 $(0.67) 3Q22 37 714 $(0.81) 4Q21 — 37 $(0.04) (a) Note: See page 13 in the Appendix for corresponding footnotes. (b) Represents a non-GAAP measure. See page 15 in the Appendix for the corresponding reconciliation of the non-GAAP measure of ROTCE. (c) Represents a non-GAAP measure. See pages 16, 17 and 18 in the Appendix for the corresponding reconciliations of the non-GAAP measures of revenue growth, expense growth, earnings per share growth, operating leverage, pre-tax margin, ROE and ROTCE excluding notable items. N/M – not meaningful. 4Q22 Financial Results Notable items impacting the quarter 4Q22: Impact of net loss from repositioning the securities portfolio, a disposal loss, severance expense and litigation reserves 3Q22: Impact of goodwill impairment, a disposal gain, severance expense and litigation reserves 4Q21: Impact of severance expense and litigation reserves = excluding the impact of notable items +203 bps(c) Up 7%(c) Up 1%(c) Up 2%(c) Up 25%(c) +665 bps(c) 31%(c) 11.9%(c) 23.6%(c) Up 3%(c) Up 9%(c)
4 2022 vs. $mm, except per share data or unless otherwise noted 2022 2021 2021 Fee revenue $12,955 $12,977 —% Investment and other revenue (82) 336 N/M Net interest revenue 3,504 2,618 34% Total revenue $16,377 $15,931 3% Provision for credit losses 39 (231) N/M Noninterest expense 13,010 11,514 13% Income before income taxes $3,328 $4,648 (28)% Net income applicable to common shareholders $2,362 $3,552 (34)% EPS $2.90 $4.14 (30)% Avg. common shares and equivalents outstanding (mm) – diluted 815 856 (5)% Operating leverage(a) N/M Pre-tax margin 20% 29% ROE 6.5% 8.9% ROTCE(b) 13.4% 17.1% Increase / (decrease) Revenue Expense EPS 2022 (511) 1,029 $(1.69) 2021 13 129 $(0.10) (a) Note: See page 13 in the Appendix for corresponding footnotes. (b) Represents a non-GAAP measure. See page 15 in the Appendix for the corresponding reconciliation of the non-GAAP measure of ROTCE. (c) Represents a non-GAAP measure. See pages 16, 17 and 18 in the Appendix for the corresponding reconciliations of the non-GAAP measures of revenue growth, expense growth, earnings per share growth, operating leverage, pre-tax margin, ROE and ROTCE excluding notable items and expense growth excluding notable items and currency translation. N/M – not meaningful. 2022 Financial Results Notable items impacting the year 2022: Impact of goodwill impairment, net loss from repositioning the securities portfolio, severance expense, litigation reserves, accelerated amortization of deferred costs for depositary receipts services related to Russia and net gains on disposals 2021: Impact of litigation reserves, severance expense and gains on disposals Up 5%(c), or up 8%(c) excluding currency translation Up 8%(c) +86 bps(c) 29%(c) 10.3%(c) 21.0%(c) Up 6%(c) = excluding the impact of notable items
5 4Q22 3Q22 4Q21 Consolidated regulatory capital ratios:(a) Tier 1 leverage ratio 5.8% 5.4% 5.5% Supplementary leverage ratio ("SLR") 6.8 6.3 6.6 Common Equity Tier 1 ratio – Advanced Approaches 11.2 10.1 11.4 Common Equity Tier 1 ratio – Standardized Approach 11.4 10.0 11.2 Consolidated regulatory liquidity ratios: Liquidity coverage ratio ("LCR") 118% 116% 109% Cash dividends per common share $0.37 $0.37 $0.34 Common stock dividends ($mm) $305 $303 $280 Common stock repurchases ($mm) 2 2 1,249 Book value per common share $44.40 $43.18 $47.50 Tangible book value per common share(b) 23.11 21.55 24.31 Common shares outstanding (mm) 808 808 804 Capital and Liquidity Note: See page 13 in the Appendix for corresponding footnotes.
6 4Q22 vs. $bn, avg. 4Q22 3Q22 4Q21 Deposits: Noninterest-bearing $76 (11)% (17)% Interest-bearing 208 2% (10)% Total deposits $284 (2)% (12)% Interest-earning assets: Cash and reverse repo 136 4% (10)% Loans 67 (1)% 4% Investment securities: HQLA 119 (2)% (8)% Non-HQLA 25 (9)% (17)% Total investment securities $144 (3)% (10)% Total interest-earning assets $353 —% (8)% Net Interest Revenue and Balance Sheet Trends N e t I n t e r e s t R e v e n u e ( $ m m ) +14% +56% • Avg. deposits of $284bn down 2% QoQ • Avg. interest-earning assets of $353bn flat QoQ • Net interest revenue of $1,056mm up 14% QoQ, primarily reflects higher interest rates on interest-earning assets, partially offset by higher funding expense 677 926 1,056 4Q21 3Q22 4Q22
7 4Q22 vs. $mm, unless otherwise noted 4Q22 3Q22 4Q21 Staff $1,802 8% 10% Software and equipment 432 3% 14% Professional, legal and other purchased services 415 14% 6% Net occupancy 143 15% 8% Sub-custodian and clearing 112 (10)% (7)% Distribution and servicing 86 (2)% 15% Business development 45 32% 2% Bank assessment charges 19 (46)% (37)% Goodwill impairment — N/M N/M Amortization of intangible assets 16 (6)% (16)% Other 143 19% (1)% Total noninterest expense $3,213 (13)% 8% Noninterest Expense • Noninterest expense up 8% YoY, primarily reflecting higher severance expense – Excluding notable items, noninterest expense up 2%(a), primarily reflecting higher investments in growth, infrastructure and efficiency initiatives and higher revenue-related expenses, as well as the impact of inflation, partially offset by the favorable impact of a stronger U.S. dollar • Noninterest expense down 13% QoQ, excluding notable items, noninterest expense up 1%(a) (a) Represents a non-GAAP measure. See page 16 in the Appendix for the corresponding reconciliation of the non-GAAP measures of expense growth excluding notable items. Up 2% (a) excluding notable items Up 1% (a) excluding notable items
8 4Q22 vs. $mm, unless otherwise noted 4Q22 3Q22 4Q21 Total revenue by line of business: Asset Servicing $1,681 5% 15% Issuer Services 491 3% 30% Total revenue $2,172 5% 18% Provision for credit losses 11 N/M N/M Noninterest expense 1,576 1% 6% Income before income taxes $585 12% 67% Fee revenue 1,446 1% 2% Net interest revenue 656 22% 79% Foreign exchange revenue 149 13% 1% Securities lending revenue(a) 50 4% 11% Financial ratios, balance sheet data and metrics: Pre-tax margin 27% 175 bps 787 bps AUC/A ($trn, period end)(b)(c) $31.4 5% (9)% Deposits ($bn, avg.) $177 —% (12)% Market value of securities on loan ($bn, period end)(d) $449 3% —% • Total revenue of $2,172mm up 18% YoY – Asset Servicing up 15% YoY, primarily reflecting higher net interest revenue, lower money market fee waivers and higher client activity, partially offset by lower market values and the unfavorable impact of a stronger U.S. dollar – Issuer Services up 30% YoY, primarily reflecting higher net interest revenue and lower money market fee waivers • Noninterest expense of $1,576mm up 6% YoY, primarily reflecting higher investments in growth, infrastructure and efficiency initiatives, as well as the impact of inflation, partially offset by the favorable impact of a stronger U.S. dollar • Income before income taxes of $585mm up 67% YoY Securities Services Note: See page 13 in the Appendix for the corresponding footnotes. N/M – not meaningful.
9 4Q22 vs. $mm, unless otherwise noted 4Q22 3Q22 4Q21 Total revenue by line of business: Pershing $673 2% 22% Treasury Services 382 (2)% 15% Clearance and Collateral Management 344 8% 19% Total revenue $1,399 2% 19% Provision for credit losses 6 N/M N/M Noninterest expense 785 7% 16% Income before income taxes $608 (4)% 21% Fee revenue 988 1% 14% Net interest revenue 396 5% 33% Financial ratios, balance sheet data and metrics: Pre-tax margin 43% (266) bps 64 bps AUC/A ($trn, end of period)(a)(b) $12.7 6% 8% Deposits ($bn, avg.) $86 (5)% (14)% Pershing: Net new assets (U.S. platform) ($bn)(c) $42 N/M N/M Avg. active clearing accounts ('000) 7,603 2% 4% Treasury Services: Avg. daily U.S. dollar payment volumes ('000) 246 5% —% Clearance and Collateral Management: Avg. tri-party collateral management balances ($bn) $5,451 —% 10% Market and Wealth Services Note: See page 13 in the Appendix for the corresponding footnotes. N/M – not meaningful. • Total revenue of $1,399mm up 19% YoY – Pershing up 22% YoY, primarily reflecting lower money market fee waivers, higher fees on sweep balances and higher net interest revenue, partially offset by the impact of prior year lost business and the impact of lower equity markets – Treasury Services up 15% YoY, primarily reflecting higher net interest revenue and lower money market fee waivers – Clearance and Collateral Management up 19% YoY, primarily reflecting higher net interest revenue and U.S. government clearance volumes • Noninterest expense of $785mm up 16% YoY, primarily reflecting higher investments in growth, infrastructure and efficiency initiatives, as well as the impact of inflation, partially offset by the favorable impact of a stronger U.S. dollar • Income before income taxes of $608mm up 21% YoY
10 4Q22 vs. $mm, unless otherwise noted 4Q22 3Q22 4Q21 Total revenue by line of business: Investment Management $550 (5)% (22)% Wealth Management 275 (3)% (12)% Total revenue $825 (4)% (19)% Provision for credit losses 1 N/M N/M Noninterest expense 699 (48)% (7)% Income before income taxes $125 125% (55)% Fee revenue 776 (4)% (18)% Net interest revenue 52 (9)% 2% Financial ratios, balance sheet data and metrics: Pre-tax margin 15% N/M (1,213) bps Adjusted pre-tax operating margin – Non-GAAP(b) 17% N/M (1,252) bps AUM ($bn, end of period)(c) $1,836 3% (25)% Loans ($bn, avg.) $14 (1)% 13% Deposits ($bn, avg.) $16 (5)% (11)% Wealth Management: Client assets ($bn, end of period)(d) $269 5% (16)% • Total revenue of $825mm down 19% YoY – Investment Management down 22% YoY, primarily reflecting lower market values, the mix of cumulative net inflows, the unfavorable impact of a stronger U.S. dollar, the impact of the Alcentra divestiture and strategic equity investment gains recorded in 4Q21, partially offset by lower money market fee waivers – Wealth Management revenue down 12% YoY, primarily reflecting lower market values • Noninterest expense of $699 down 7% YoY, primarily reflecting the impact of the Alcentra divestiture, the favorable impact of a stronger U.S. dollar, and lower revenue-related expenses, partially offset by higher severance expense – Noninterest expense down 48% QoQ, excluding notable items, noninterest expense up 1%(a) • Income before income taxes of $125mm down 55% YoY • AUM of $1.8trn down 25% YoY, driven by lower market values, the unfavorable impact of a stronger U.S. dollar and the divestiture of Alcentra, partially offset by net inflows • Wealth Management client assets of $269bn down 16% YoY, primarily driven by lower markets Investment and Wealth Management (a) Represents a non-GAAP measure. See page 19 in the Appendix for the corresponding reconciliation of the non-GAAP measures of expense growth, excluding notable items. (b) Adjusted pre-tax operating margin is net of distribution and servicing expense. Represents a non-GAAP measure. See page 19 in the Appendix for corresponding reconciliation of the non-GAAP measure of adjusted pre-tax operating margin. Note: See page 13 in the Appendix for the corresponding footnotes (c) and (d). N/M – not meaningful.
11 • Total revenue includes corporate treasury and other investment activity, including hedging activity which has an offsetting impact between fee and other revenue and net interest expense – YoY and QoQ decreases in total revenue primarily reflect the $449 million net loss from repositioning the securities portfolio • Noninterest expense increased YoY and QoQ, primarily driven by higher severance expense $mm, unless otherwise noted 4Q22 3Q22 4Q21 Fee revenue $12 $28 $2 Investment and other revenue (442) (5) 19 Net interest (expense) (48) (47) (38) Total revenue $(478) $(24) $(17) Provision for credit losses 2 (26) (1) Noninterest expense 153 29 55 (Loss) before income taxes $(633) $(27) $(71) Other Segment
Appendix
13 Footnotes Page 3 – 4Q22 Financial Results (a) Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense. Page 4 – 2022 Financial Results (a) Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense. Page 5 – Capital and Liquidity (a) Regulatory capital ratios for December 31, 2022 are preliminary. For our CET1, our effective capital ratios under the U.S. capital rules are the lower of the ratios as calculated under the Standardized and Advanced Approaches, which for December 31, 2022 was the Advanced Approaches, for September 30, 2022 was the Standardized Approach, and for December 31, 2021 was the Standardized Approach. (b) Tangible book value per common share — Non-GAAP excludes goodwill and intangible assets, net of deferred tax liabilities. See page 15 for corresponding reconciliation of this non-GAAP measure. Page 8 – Securities Services (a) Included in investment services fees in the Asset Servicing business. (b) December 31, 2022 information is preliminary. (c) Consists of AUC/A primarily from the Asset Servicing business and, to a lesser extent, the Issuer Services business. Includes the AUC/A of CIBC Mellon Global Securities Services Company (“CIBC Mellon”), a joint venture with the Canadian Imperial Bank of Commerce, of $1.5trn at December 31, 2022, $1.4trn at September 30, 2022, and $1.7trn at December 31, 2021. (d) Represents the total amount of securities on loan in our agency securities lending program. Excludes securities for which BNY Mellon acts as agent on behalf of CIBC Mellon clients, which totaled $68 billion at December 31,2022, $75bn at September 30, 2022, and $71bn at December 31, 2021. Page 9 – Market and Wealth Services (a) December 31, 2022 information is preliminary. (b) Consists of AUC/A from the Clearance and Collateral Management and Pershing lines of business. (c) Net new assets represent net flows of assets (e.g., net cash deposits and net securities transfers, including dividends and interest) in customer accounts in Pershing LLC, a U.S. broker-dealer. Page 10 – Investment and Wealth Management (c) December 31, 2022 information is preliminary. Excludes assets managed outside of the Investment and Wealth Management business segment. (d) December 31, 2022 information is preliminary. Includes AUM and AUC/A in the Wealth Management business.
14 4Q22 3Q22 2Q22 1Q22 4Q21 FY22 FY21 Investment services fees (see table below) $ — $ (1) $ (26) $ (126) $ (148) $ (153) $ (547) Investment management and performance fees (19) (21) (40) (85) (116) (165) (429) Distribution and servicing fees — — (2) (11) (14) (13) (51) Total fee revenue (19) (22) (68) (222) (278) (331) (1,027) Less: Distribution and servicing expense — — 2 23 35 25 111 Net impact of money market fee waivers $ (19) $ (22) $ (66) $ (199) $ (243) $ (306) $ (916) Impact to investment services fees by line of business(a) Asset Servicing $ — $ — $ — $ (19) $ (31) $ (19) $ (105) Issuer Services — — (1) (11) (18) (12) (62) Pershing — (1) (25) (90) (89) (116) (343) Treasury Services — — — (6) (10) (6) (37) Total impact to investment services fees by line of business $ — $ (1) $ (26) $ (126) $ (148) $ (153) $ (547) Impact to revenue by line of business(a) Asset Servicing $ — $ — $ (1) $ (28) $ (50) $ (29) $ (176) Issuer Services — (1) (1) (14) (24) (16) (83) Pershing — (1) (29) (107) (106) (137) (401) Treasury Services — — — (8) (14) (8) (52) Investment Management (19) (20) (37) (63) (81) (139) (303) Wealth Management — — — (2) (3) (2) (12) Total impact to revenue by line of business $ (19) $ (22) $ (68) $ (222) $ (278) $ (331) $ (1,027) Money Market Fee Waivers Impact (a) The line of business revenue for management reporting purposes reflects the impact of revenue transferred between the businesses.
15 2022 2021 Dec. 31 Sept. 30 Dec. 31 BNY Mellon shareholders’ equity at period end — GAAP $ 40,734 $ 39,737 $ 43,034 Less: Preferred stock 4,838 4,838 4,838 BNY Mellon common shareholders’ equity at period end — GAAP 35,896 34,899 38,196 Less: Goodwill 16,150 16,412 17,512 Intangible assets 2,901 2,902 2,991 Add: Deferred tax liability — tax deductible goodwill 1,181 1,175 1,178 Deferred tax liability — intangible assets 660 660 676 BNY Mellon tangible common shareholders’ equity at period end — Non-GAAP $ 18,686 $ 17,420 $ 19,547 Period-end common shares outstanding (in thousands) 808,445 808,280 804,145 Book value per common share — GAAP $ 44.40 $ 43.18 $ 47.50 Tangible book value per common share — Non-GAAP $ 23.11 $ 21.55 $ 24.31 4Q22 3Q22 4Q21 FY22 FY21 Net income applicable to common shareholders of The Bank of New York Mellon Corporation — GAAP $ 509 $ 319 $ 822 $ 2,362 $ 3,552 Add: Amortization of intangible assets 16 17 19 67 82 Less: Tax impact of amortization of intangible assets 4 4 5 16 20 Adjusted net income applicable to common shareholders of The Bank of New York Mellon Corporation, excluding amortization of intangible assets — Non-GAAP $ 521 $ 332 $ 836 $ 2,413 $ 3,614 Average common shareholders’ equity $ 35,259 $ 35,942 $ 37,941 $ 36,175 $ 39,695 Less: Average goodwill 16,229 17,189 17,481 17,060 17,492 Average intangible assets 2,905 2,922 2,988 2,939 2,979 Add: Deferred tax liability — tax deductible goodwill 1,181 1,175 1,178 1,181 1,178 Deferred tax liability — intangible assets 660 660 676 660 676 Average tangible common shareholders’ equity — Non-GAAP $ 17,966 $ 17,666 $ 19,326 $ 18,017 $ 21,078 Return on common equity(a) — GAAP 5.7% 3.5% 8.6% 6.5% 8.9% Return on tangible common equity(a) — Non-GAAP 11.5% 7.5% 17.2% 13.4% 17.1% Return on Common Equity and Tangible Common Equity Reconciliation Book Value and Tangible Book Value Per Common Share Reconciliation (a) Quarterly returns are annualized.
16 4Q22 vs. 2022 vs. 4Q22 3Q22 4Q21 3Q22 4Q21 2022 2021 2021 Total revenue — GAAP $ 3,918 $ 4,279 $ 4,015 (8) % (2) % $ 16,377 $ 15,931 3 % Notable items(a) (460) 37 — (511) 13 Total revenue, ex-notables — Non-GAAP $ 4,378 $ 4,242 $ 4,015 3 % 9 % $ 16,888 $ 15,918 6 % Investment and other revenue — GAAP $ (360) $ (82) Notable items(a) (460) (423) Investment and other revenue, ex-notables — Non-GAAP $ 100 $ 341 Noninterest expense — GAAP $ 3,213 $ 3,679 $ 2,967 (13) % 8 % $ 13,010 $ 11,514 13 % Notable items(a) 213 714 37 1,029 129 Noninterest expense, ex-notables — Non-GAAP $ 3,000 $ 2,965 $ 2,930 1 % 2 % $ 11,981 $ 11,385 5 % Income before income taxes — GAAP $ 685 $ 630 $ 1,065 $ 3,328 $ 4,648 Notable items(a) (673) (677) (37) (1,540) (116) Income before income taxes, ex-notables — Non-GAAP $ 1,358 $ 1,307 $ 1,102 $ 4,868 $ 4,764 Net income applicable to common shareholders — GAAP $ 509 $ 319 $ 822 60 % (38) % $ 2,362 $ 3,552 (34) % Notable items(a) (548) (664) (30) (1,378) (85) Net income applicable to common shareholders, ex-notables — Non-GAAP $ 1,057 $ 983 $ 852 8 % 24 % $ 3,740 $ 3,637 3 % Diluted earnings per share — GAAP $ 0.62 $ 0.39 $ 1.01 59 % (39) % $ 2.90 $ 4.14 (30) % Notable items(a) (0.67) (0.81) (0.04) (1.69) (0.10) Diluted earnings per share, ex-notables — Non-GAAP $ 1.30 $ 1.21 $ 1.04 7 % 25 % $ 4.59 $ 4.24 8 % Operating leverage — GAAP(c) 423 bps (1,071) bps (1,019) bps Operating leverage, ex-notables — Non-GAAP(a)(c) 203 bps 665 bps 86 bps (a) Notable items in 4Q22 include the net loss from repositioning the securities portfolio, a disposal loss (reflected in investment and other revenue), severance expense and litigation reserves. Notable items in 3Q22 include goodwill impairment, a disposal gain (reflected in investment and other revenue), severance expense and litigation reserves. Notable items in 4Q21 include severance expense and litigation reserves. Notable items in 2022 include the 3Q22 goodwill impairment, the 4Q22 net loss from repositioning the securities portfolio, severance expense, litigation reserves, the 1Q22 accelerated amortization of deferred costs for depositary receipts services related to Russia and net gains on disposals (reflected in investment and other revenue). Notable items in 2021 include litigation reserves, severance expense and gains on disposals (reflected in investment and other revenue). (b) Does not foot due to rounding. (c) Operating leverage is the rate of increase (decrease) in total revenue less the rate of increase (decrease) in total noninterest expense. Reconciliation of Non-GAAP measures – Impact of Notable Items (b)(b) (b)
17 4Q22 2022 Results – GAAP Notable items(a) Non-GAAP ex. notable items Results – GAAP Notable items(a) Non-GAAP ex. notable items Total revenue $ 3,918 (460) $ 4,378 $ 16,377 (511) $ 16,888 Provision for credit losses 20 — 20 39 — 39 Noninterest expense 3,213 213 3,000 13,010 1,029 11,981 Income before income taxes $ 685 $ (673) $ 1,358 $ 3,328 $ (1,540) $ 4,868 Pre-tax operating margin(b) 17% 31% 20% 29% (a) Notable items in 4Q22 include the net loss from repositioning the securities portfolio, a disposal loss (reflected in investment and other revenue), severance expense and litigation reserves. Notable items in 2022 include the 3Q22 goodwill impairment, the 4Q22 net loss from repositioning the securities portfolio, severance expense, litigation reserves, the 1Q22 accelerated amortization of deferred costs for depositary receipts services related to Russia and net gains on disposals (reflected in investment and other revenue). (b) Income before income taxes divided by total revenue. Pre-tax Operating Margin Reconciliation – Impact of Notable Items 2022 vs. 2022 2021 2021 Noninterest expense — GAAP $ 13,010 $ 11,514 13% Notable items(a) 1,029 129 Impact of changes in foreign currency exchange rates — (292) Noninterest expense, ex. notables and currency adjustment— Non-GAAP $ 11,981 $ 11,093 8% Noninterest Expense Reconciliation – Impact of Notable Items and Impact of Changes in Foreign Currency Exchange Rates
18 4Q22 2022 Results – GAAP Notable items(a) Non-GAAP ex. notable items Results – GAAP Notable items(a) Non-GAAP ex. notable items Net income applicable to common shareholders of The Bank of New York Mellon Corporation $ 509 $ (548) $ 1,057 $ 2,362 $ (1,378) $ 3,740 Add: Amortization of intangible assets 16 — 16 67 — 67 Less: Tax impact of amortization of intangible assets 4 — 4 16 — 16 Adjusted net income applicable to common shareholders of The Bank of New York Mellon Corporation, excluding amortization of intangible asset $ 521 $ (548) $ 1,069 $ 2,413 $ (1,378) $ 3,791 Average common shareholders’ equity $ 35,259 — $ 35,259 $ 36,175 — $ 36,175 Less: Average goodwill 16,229 — 16,229 17,060 — 17,060 Average intangible assets 2,905 — 2,905 2,939 — 2,939 Add: Deferred tax liability — tax deductible goodwill 1,181 — 1,181 1,181 — 1,181 Deferred tax liability — intangible assets 660 — 660 660 — 660 Average tangible common shareholders’ equity $ 17,966 — $ 17,966 $ 18,017 — $ 18,017 Return on common equity(b) 5.7% 11.9% 6.5% 10.3% Return on tangible common equity(b) 11.5% 23.6% 13.4% 21.0% Return on Common Equity and Tangible Common Equity Reconciliation – Impact of Notable Items (a) Notable items in 4Q22 include the net loss from repositioning the securities portfolio, a disposal loss (reflected in investment and other revenue), severance expense and litigation reserves. Notable items in 2022 include the 3Q22 goodwill impairment, the 4Q22 net loss from repositioning the securities portfolio, severance expense, litigation reserves, the 1Q22 accelerated amortization of deferred costs for depositary receipts services related to Russia and net gains on disposals (reflected in investment and other revenue). (b) Quarterly returns are annualized. 4Q22 2022 Results – GAAP Notable items(a) Non-GAAP ex. notable items Results – GAAP Notable items(a) Non-GAAP ex. notable items Provision for income taxes $ 142 $ (125) $ 267 $ 768 $ (162) $ 930 Income before income taxes $ 685 $ (673) $ 1,358 $ 3,328 $ (1,540) $ 4,868 Effective tax rate 20.7% 19.7% 23.1% 19.1% Tax Rate Reconciliation – Impact of Notable Items
19 (a) Income before income taxes divided by total revenue. (b) Notable items in 4Q22 include severance expense. Notable items in 3Q22 include goodwill impairment and severance expense. 4Q22 4Q21 Income before income taxes — GAAP $ 125 $ 278 Total revenue — GAAP $ 825 $ 1,020 Less: Distribution and servicing expense 87 75 Adjusted total revenue, net of distribution and servicing expense — Non-GAAP $ 738 $ 945 Pre-tax operating margin — GAAP(a) 15% 27% Adjusted pre-tax operating margin, net of distribution and servicing expense — Non-GAAP(a) 17% 29% Pre-tax Operating Margin Reconciliation – Investment and Wealth Management Segment Investment and Wealth Management Segment Reconciliation of Non-GAAP measures – Impact of Notable Items 4Q22 vs. 4Q22 3Q22 3Q22 Noninterest expense — GAAP $ 699 $ 1,356 (48) % Notable items(b) 14 679 Noninterest expense, ex-notables — Non-GAAP $ 685 $ 677 1%
20 A number of statements in The Bank of New York Mellon Corporation’s (the “Corporation”) presentations, the accompanying slides and the responses to your questions are “forward-looking statements.” Words such as “estimate,” “forecast,” “project,” “anticipate,” “likely,” “target,” “expect,” “intend,” “continue,” “seek,” “believe,” “plan,” “goal,” “could,” “should,” “would,” “may,” “might,” “will,” “strategy,” “synergies,” “opportunities,” “trends,” “ambition,” “objective,” “aim,” “future,” “potentially,” “outlook” and words of similar meaning may signify forward-looking statements. These statements relate to, among other things, the Corporation’s expectations regarding: capital plans including repurchases, strategic priorities, financial goals, organic growth, performance, organizational quality and efficiency, investments, including in technology and product development, capabilities, resiliency, revenue, net interest revenue, money market fee waivers, fees, expenses, cost discipline, sustainable growth, innovation in products and services, company management, human capital management (including related ambitions, objectives, aims and goals), deposits, interest rates and yield curves, securities portfolio, taxes, business opportunities, divestments, volatility, preliminary business metrics and regulatory capital ratios and statements regarding the Corporation’s aspirations, as well as the Corporation’s overall plans, strategies, goals, objectives, expectations, outlooks, estimates, intentions, targets, opportunities, focus and initiatives, including the potential effects of the coronavirus pandemic on any of the foregoing. These forward-looking statements are based on assumptions that involve risks and uncertainties and that are subject to change based on various important factors (some of which are beyond the Corporation’s control). Actual outcomes may differ materially from those expressed or implied as a result of a number of factors, including, but not limited to, those discussed in “Risk Factors” in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report”) and in other filings of the Corporation with the Securities and Exchange Commission (the “SEC”). Statements about the effects of the current and near-term market and macroeconomic outlook on the Corporation, including on its business, operations, financial performance and prospects, may constitute forward-looking statements, and are based on assumptions that involve risks and uncertainties and that are subject to change based on various important factors (some of which are beyond the Corporation's control), including geopolitical risks (including those related to Russia’s invasion of Ukraine), as well as the scope and duration of the pandemic, actions taken by governmental authorities and other third parties in response to the pandemic, the availability, use and effectiveness of vaccines, and the direct and indirect impact of the pandemic on the Corporation, its clients, customers and third parties. The timing, manner and amount of repurchases is subject to various factors, including our capital position, capital deployment opportunities, prevailing market conditions, legal and regulatory considerations, and our outlook for the economic environment. Preliminary business metrics and regulatory capital ratios are subject to change, possibly materially, as the Corporation completes its Annual Report on Form 10-K for the year ended December 31, 2022. All forward-looking statements speak only as of January 13, 2023, and the Corporation undertakes no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events. For additional information regarding the Corporation, please refer to the Corporation's SEC filings available at www.bnymellon.com/investorrelations. Non-GAAP Measures: In this presentation we discuss certain non-GAAP measures in detailing the Corporation’s performance, which exclude certain items or otherwise include components that differ from GAAP. We believe these measures are useful to the investment community in analyzing the financial results and trends of ongoing operations. We believe they facilitate comparisons with prior periods and reflect the principal basis on which the Corporation’s management monitors financial performance. Additional disclosures relating to non-GAAP measures are contained in the Corporation’s reports filed with the SEC, including the 2021 Annual Report, and the fourth quarter 2022 earnings release and the fourth quarter 2022 financial supplement, and are available at www.bnymellon.com/investorrelations. Cautionary Statement