Published: Wednesday, 22 Jul 2009 | 11:58 AM ET

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Bank of New York Mellon, the asset management and servicing group, said Wednesday that second-quarter profit fell 43 percent after charges to repay U.S. government bailout money and writing down the value of investments.

Its shares

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[BK  Loading...      ()   ] fell 7.7 percent while most other asset managers posted modest gains.

Net income for the company, the world's largest trust bank, dropped to $176 million, or 15 cents a share, in the quarter from $309 million, or 27 cents a share, a year earlier. Total revenue declined to $2.96 billion from $3.38 billion.

"It seems that investors are penalizing companies for their conservative approach, sending stock prices down if revenue is a little softer," said Matt McCormick, a portfolio manager and banking analyst at Bahl & Gaynor Investment Counsel.

Earnings were reduced by 23 cents per share due to its repayment of $3 billion in bailout funds and payment of a special assessment to the Federal Deposit Insurance Corp. It recorded a one-time charge of $196.5 million related to repaying funds from the government's Troubled Asset Relief Program.

Excluding items, earnings stood at 57 cents per share, down from 82 cents a year earlier, but exceeded Wall Street expectations of 53 cents.

Income from continuing operations attributable to common shareholders fell to $267 million, or 23 cents per share, from $303 million, or 26 cents a share. Revenue was reduced by $256 million because it wrote down the value of some investments. The company wrote down $152 million during the second quarter in 2008.

Chief Executive Robert Kelly said investment losses remained stubbornly high due to further deterioration in the housing market.

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"The portfolio still has risks and we want to manage those risks down," Kelly said in an interview, explaining that it may write down the assets or sell them.

The company also set aside $61 million for credit losses during the quarter, more than four times the $13 million set aside a year ago.

The company did not change its quarterly dividend of 9 cents a share. In the first quarter, it reduced the payout from 24 cents.

Assets under custody and administration totaled $20.7 trillion, down 10 percent from a year earlier, but up 6 percent from the first quarter.

Assets under management, excluding securities lending assets, stood at $926 billion, down 17 percent from a year earlier, but up 5 percent from the last quarter. Its shares fell $2.26 to $26.85 on the New York Stock Exchange.

On Tuesday, chief rival State Street

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[STT  Loading...      ()   ] reported a $3.3 billion quarterly loss after writing down the value of investments and earning lower fees during the financial crisis.

Bank of New York Mellon's Kelly said potential acquisitions "are not a big part of our thinking," and that the company is being fairly cautious at the moment.

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