BNY Mellon’s massaged earnings reports

By Felix Salmon
December 6, 2010
pulls no punches today:

" data-share-img="" data-share="twitter,facebook,linkedin,reddit,google" data-share-count="true">

With Peter Eavis having left the WSJ, who will take on the job of poring over banks’ balance sheets to expose their crazy accounting? Aaron Elstein, that’s who! He pulls no punches today:

BNY Mellon spins the numbers to make its results look better.

Consider the way the company reports earnings. In quarterly releases, BNY Mellon prefers to highlight income from continuing operations, because it feels that’s the best way to show underlying performance. But its definition of “continuing operations” is always changing, according to a review by Crain’s New York Business of all the bank’s releases for the past three years.

BNY Mellon sometimes excluded investment write-downs from operating results or assessment fees imposed by the Federal Deposit Insurance Corp. At other times, it didn’t include certain taxes or the costs of settling a dispute with the IRS over leases. In one quarter, BNY Mellon excluded litigation reserves; in two others, it called them “special” litigation reserves.

Additionally, the 48,000-employee company routinely excludes costs associated with relocating staffers and merger-related items, even though it often moves people and does M&A deals—26 over the past three years…

“They’re definitely playing games, cherry-picking to inflate their numbers,” says Douglas Carmichael, an accounting professor at Baruch College and a former chief auditor of the Public Company Accounting Oversight Board…

Longtime banking analyst Nancy Bush of NAB Research says BNY Mellon’s frequent changes in defining earnings make it difficult for investors to figure out how well the bank is doing. “You never get the same figures twice,” she says. “It’s very frustrating.”

Yes, BNY reports GAAP figures—but at banks, GAAP figures tell you very little, and it’s crucial that the reported numbers allow analysts to make apples-to-apples comparisons. Bank earnings are extremely opaque at the best of times, which is one of the reasons that banks tend to trade at lower multiples than other industries: no one really knows what might be buried within them. And as a rule, the more that senior management is spinning its earnings rather than reporting them as transparently as it can, the less trust that markets will have in the bank.

I do wonder, though. Is this a tactical decision by BNY’s Bob Kelly? Has he calculated that the boost in share price he gets from reporting artificially-rosy earnings is greater than the decline in share price he gets from leading analysts on a wild goose chase every quarter to try to work out what he’s doing? Does he reckon that analysts’ opinions don’t actually matter that much, and that his shareholders—including Warren Buffett—would rather just see something pretty and massaged?

Or is it simply that once he started down this road he couldn’t stop? It might make sense to switch to a more transparent and consistent set of reporting standards, but that would mean reporting lower earnings, and it’s hard for any CEO to admit that prior earnings figures were massaged in any way. So we might have to wait for a new BNY CEO before we see any changes on this front. After all, the chairman of the board—one Robert Kelly—is not about to rock the boat at all.


We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see

A bail bond agent, or bondsman, is any person or corporation that will act as a surety and pledge money or property as bail for the appearance of persons accused in court. Although banks, insurance companies and other similar institutions are usually the sureties on other types of contracts (for example, to bond a contractor who is under a contractual obligation to pay for the completion of a construction project) such entities are reluctant to put their depositors’ or policyholders’ funds at the kind of risk involved in posting a bail bond. Bail bond agents, on the other hand, are usually in the business to cater to criminal defendants, often securing their customers’ release in just a few hours. Bail bond agents are almost exclusively found in the United States and its former commonwealth, The Philippines. In most other countries bail is usually much less and the practice of bounty hunting is illegal.

Kimree is a world-leading e-cigarette company. According to Frost & Sullivan, Kimree was the second largest e-cigarette designer and manufacturer in the world in terms of both revenues and production volume in 2013. The Company designs and produces a broad range of e-cigarette products, including disposable e-cigarettes, rechargeable e-cigarettes and e-cigarette accessories. Visit for more.

a new best delivers and as a result quotes around found in The indian subcontinent can be caused by

The longchamp handbags outlet tributes to Longchamps heritage by harkening back to past collections. The leather can be used in the smoothest and many organic form using a lighting patina effect and also in warm shades, to provide a antique visual appeal towards the different types. A restrained, stylish and easy