BNY's NIM Streak Hits Fourth Quarter as Deposits Dip and Buybacks Accelerate
Net interest margin at Bank of New York Mellon expanded for a fourth straight quarter to 1.45%, even as average deposits fell for the first time in five quarters and share repurchases rose to $1.1 billion.
Bank of New York Mellon (BNY), the custody-and-asset-servicing bank that safeguards trillions of dollars in institutional assets, extended its net-interest-margin expansion streak to four consecutive quarters, with NIM widening 7 bps sequentially to 1.45% in the second quarter of 2026 from 1.38% in the first, and 18 bps higher than the 1.27% posted a year earlier. The gains built on 7 bps of expansion in the first quarter and 4 bps in the third quarter of 2025, as the bank reinvested maturing investment securities into higher-yielding assets, an effect only partly offset by continued deposit margin compression.
That reinvestment dynamic showed up directly in net interest income, which rose 6% quarter over quarter to $1,446 million and 20% year over year, extending a steady acceleration from 13% YoY growth in the fourth quarter of 2025 to 18% in the first quarter and 20% in the second. The NII trajectory came even as average deposits slipped 1% sequentially to $314.0 billion, the first sequential decline in five quarters after moves of -1%, +3%, +4% and flat in the preceding stretch, while year-over-year deposit growth decelerated to 5% from 13% in the first quarter. Loan growth more than compensated on the balance-sheet side: average loans rose 6% QoQ and 20% YoY to $85.6 billion, accelerating from 16% YoY growth in the first quarter, with gains spread across all three business segments — Securities Services loans up 16% YoY, Market and Wealth Services up 27% YoY, and Investment and Wealth Management up 3% YoY.
Fee income told a complementary story. Investment services fees, BNY's core custody and servicing revenue line, climbed 7% QoQ and 11% YoY to $4,036 million, led by Issuer Services fees, which jumped 67% QoQ to $463 million on higher Corporate Trust and Depositary Receipts revenue. Asset Servicing fees, the larger and steadier of the two lines, grew a more modest 3% QoQ and 12% YoY.
The Investment and Wealth Management segment delivered the sharpest turnaround of the quarter. Pre-tax margin nearly doubled sequentially to 21.1% from 10.9% in the first quarter, when results had been depressed by an expense and timing hit carried over from the fourth quarter of 2025. Income before taxes in the segment rose 102% QoQ to $182 million, driven by improved seed capital results and lower noninterest expense.
Capital ratios told a more cautious story. The CET1 ratio held flat at 11.0% quarter over quarter but was down from 11.5% a year earlier and from 11.9% at year-end 2025, reflecting RWA growth alongside continued capital returns. The Tier 1 leverage ratio extended its multi-quarter slide to 5.9%, down 7 bps QoQ and 17 bps YoY, as average assets grew faster than capital. BNY nonetheless stepped up buybacks to $1.1 billion in the second quarter from $983 million in the first, drawing on the $10 billion authorization announced in the first quarter, with the total payout ratio holding near 87% year-to-date.
Credit quality remained a tailwind rather than a drag. The bank booked a provision benefit of $8 million in the second quarter, following a $7 million benefit in the first quarter and a $17 million benefit a year earlier, marking the fifth consecutive quarter of reserve releases, primarily on improvements in commercial real estate exposure.
Expense growth was the quarter's counterweight. Noninterest expense growth accelerated to 7% YoY (1% QoQ) from 5% YoY in the prior quarter, driven by higher revenue-related costs, technology investments and employee salary increases. GAAP operating leverage fell to 419 bps from 606 bps in the first quarter as a result.
Taken together, the quarter showed a bank whose net-interest and fee engines are both firing while capital cushions thin under the weight of RWA growth and accelerating buybacks — a combination management will need to reconcile if deposit growth continues to decelerate.