BNY Mellon hits record $50 trillion in assets as UK gilt sell-off accelerates

BNY Mellon (BNY), the world’s largest custodian bank, has reported strong third-quarter results, driven by higher investment services fees and a record surge in assets under custody and administration, which topped $50 trillion for the first time. However, the positive performance contrasts sharply with a significant wave of selling in British government bonds by the bank’s clients, marking the fastest exit since last year’s mini-budget crisis.

The divergence in investment flows points to a mixed outlook for the global financial markets, as clients remain cautiously optimistic in the U.S. but wary of potential instability in the UK.

The New York-based custodian reported adjusted earnings of $1.52 per share, beating analyst expectations of $1.42, supported by a 3% increase in net interest income, which exceeded Wall Street’s more conservative forecasts. The higher returns were attributed to resilient investment activity among BNY’s clients and stronger yields from its bond investments, even as deposit costs increased.

“We recognise that there have been a lot of shifts in the macroeconomic outlook since the beginning of the year,” said Robin Vince, BNY Mellon’s CEO. “We see the market backdrop as pretty constructive, but there are a lot of risks and uncertainties and so for us it’s always the business of preparing for what exists, helping our customers to be able to navigate.”

While BNY enjoyed robust growth in its U.S.-based custody services, its latest data revealed a starkly different picture for the UK market. According to BNY’s iFlow data, clients sold £3.04 billion ($3.97 billion) of British gilts in September, the highest level of monthly sales since the 2022 gilts crisis. Concerns over the potential fiscal stance of the new Labour government, which is set to announce its budget on 30 October, have led to a significant pullback from UK assets.

“UK gilt markets recently faced the most concentrated round of selling by UK and international clients since the mini-budget of 2022,” said Geoff Yu, senior EMEA market strategist at BNY. “While there can be many reasons for such sales, including changing Bank of England expectations, investor exposures to UK gilts have been reduced heading into the upcoming budget.”

The rise in gilt yields relative to eurozone bonds has been partly driven by expectations that the Bank of England will be slower to reduce interest rates compared to other central banks, despite slightly stronger-than-expected UK growth figures. This has prompted many institutional investors to trim their positions in British government debt, in anticipation of potential volatility if the Labour government signals any major fiscal changes.

BNY’s dual narrative — with strong performance in the U.S. but signs of caution in the UK — underscores the ongoing tension in global markets. While the bank is benefiting from resilient client activity in its core business, investor behaviour in the UK suggests that concerns over fiscal policy and macroeconomic stability are far from resolved.

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