Bank of New York Mellon Corp`s better-than-expected profit in the third quarter failed to impress investors, who focused instead on the bank`s lower foreign exchange trading revenue.
Shares of the world`s largest custodian bank fell 3.7 percent in morning trading on Thursday.
BNY Mellon said its foreign exchange revenue slipped 9.7 percent to $158 million in the quarter ended Sept. 30, the first full quarter under new Chief Executive Charles Scharf.
The slide limited BNY Mellon`s revenue growth overall to just 2 percent.
"They`re not producing the revenue growth that we`re seeing in State Street or Northern Trust," said Marty Mosby, an analyst with Vining Sparks.
While BNY Mellon rival State Street Corp`s revenue climbed 11 percent in its latest quarter, Northern Trust Corp generated an almost 10 percent increase.
BNY Mellon`s foreign exchange revenue has been on a downtrend in recent quarters, hurt mainly by lower depositary receipts revenue, stymieing growth in total revenue.
Results from that unit overshadowed an 8.4 percent increase in the bank`s net interest revenue to $839 million, driven by higher interest rates and helping BNY Mellon post a slightly higher third-quarter profit from a year earlier.
The bank expects the slide in depositary receipts revenue to continue, forecasting a nearly $80 million quarter-over-quarter decline in the fourth quarter on a call with analysts.
Total adjusted expenses for the full year are expected to rise about 1 percent, BNY Mellon added.
The company`s third-quarter net income applicable to common shareholders rose about 1 percent to $983 million.
Earnings per share was 94 cents per share, topping analysts` average estimate of 92 cents, according to Thomson Reuters I/B/E/S.
Fees and other revenue - the biggest contributor to earnings - rose half a percentage point to $3.17 billion.
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