BNY Mellon's activist board member praises progress, even as stock slumps

By Michael Flaherty and Tim McLaughlin

NEW YORK (Reuters) - BNY Mellon Corp's activist board member on Tuesday praised the bank's financial progress and the leadership of Chief Executive Gerald Hassell, even as the company's stock is down about 12 percent over the past year and lagging the benchmark S&P 500 Index.

Ed Garden, who is also a senior executive at Trian Fund Management LP, said the bank's leadership has demonstrated the will necessary to improve performance.

"Are we satisfied? No. Do we have more work to do? Absolutely," Garden said. "...I think it's clear management is performing at a high level."

Garden made his remarks at BNY Mellon's (N:BK) annual meeting in New York. Trian, the activist hedge fund run by billionaire Nelson Peltz, owned about 2.9 percent of the bank's stock at the end of 2015.

BNY Mellon reduced expenses by 2 percent last year and revenue climbed about 5 percent, without currency effects.

BNY Mellon's stock price is clearly slumping, though. The stock is off 12 percent since last year's annual meeting, trading Tuesday at $36.14 on the New York Stock Exchange. By contrast, the S&P 500 Index is off about 3 percent during that time.

CLSA banking analyst Mike Mayo said the bank's investment management arm, which oversees $1.6 trillion in assets, generates operating profit margins that lag those of rivals. Hassell agreed improvement is needed.

In February, the bank's asset management chief, Curtis Arledge, left the company and was replaced by Mitchell Harris, who already oversaw its cluster of asset management boutiques and BNY Mellon's wealth management business.

Long-time investor Chris Davis has cut his BNY Mellon stake by more than half in the $12 billion Davis New York Venture Fund . The Davis fund owned 10.1 million shares in BNY Mellon at the end of January, down from 28.6 million shares a year earlier, fund disclosures show.

Last year, activist hedge fund Marcato Capital Management criticized the bank for having a "bloated" payroll. Marcato owned about 1.7 percent of BNY Mellon's stock as of Dec. 31.

Rival State Street Corp (N:STT) recently announced it planned to reduce headcount by several thousand over the next five years. Mayo asked Hassell if BNY Mellon had a similar opportunity.

"Headcount can be a bit of a red herring in terms of analysis," Hassell said.