Emily Portney
Chief Financial Officer at Bank of New York Mellon
Thank you, Todd. And I'll add my congratulations to you on your retirement and I want to thank you for your leadership and mentoring over the years. So, good morning everyone. As I walk you through the details of results for the quarter, all comparisons will be on a year-over-year basis unless I specify otherwise.
Starting on Page 3. Total revenue was flat and included an approximately $90 million reduction related to Russia, a notable item this quarter. Fee revenue was down 3% or flat excluding the impact related to Russia. The benefit of higher market values, as well as continued momentum across many of our businesses was offset by the impact of lost business in Pershing and Corporate Trust in the prior year, lower FX revenue of elevated levels in the first quarter of last year and the unfavorable impact of a stronger U.S. dollar.
Well not on the page, firmwide AUC/A of $45.5 trillion, increased by 9% of which 8% is growth from new and existing clients and 1% is driven by the impact of higher market values, net of currency headwinds. AUM of $2.3 trillion, increased by 2% year-over-year, reflecting cumulative net inflows and higher market values, partially offset by the unfavorable impact of the stronger U.S. dollar.
Money market fee waivers, net of distribution and servicing expense were $199 million in the quarter, an improvement of $44 million compared to the prior quarter. This reflects the benefit of higher average short-term interest rates, partially offset by higher money market fund balances. Once again, our growth in money market fund balances meaningfully outpaced the industry. Together, the impact of lower waivers and higher balances drove a sequential increase in pre-tax income of close to $60 million. On a year-over-year basis, fee waivers had a de minimis impact to our fee revenue.
Investment and other revenue was $70 million. And net interest revenue increased by 7%, reflecting higher interest rates on interest earning assets, change in mix and lower funding expense. Expenses were up about 5.5% or 6% excluding notable items. Provision for credit losses was $2 million. The benefit from the continued improvement in the credit portfolio, led by commercial real estate, was more than offset by a $15 million reserve build on interest-bearing deposits with banks in Russia.
And our effective tax rate was approximately 17% as expected due to the annual vesting of stock based awards in the first quarter, which provided a seasonal benefit. EPS was $0.86 and included an $0.08 negative impact of the notable items related to Russia. Pre-tax margin and ROTCE were 23% and 15% respectively on a reported basis and 25% and 17% excluding notable items.
On to capital and liquidity on Page 4. Our consolidated Tier 1 leverage ratio, which continues to be our binding constraint was 5.3%, down 15 basis points sequentially. The sharp rise in interest rates resulted in a $1.5 billion impact through unrealized losses in our available for sale securities portfolio. And we distributed roughly 60% of our earnings for our shareholders predominantly through dividends.
The impact of the reduction of capital on our Tier 1 leverage ratio was partially offset by the benefit of a smaller balance sheet quarter-over-quarter. Our CET1 ratio was 10.1%, down approximately 100 basis points compared to the end of the prior quarter, primarily reflecting the negative mark-to-market of the AFS portfolio, as well as an approximately 30 basis point impact from the adoption of [Indecipherable]. Finally, our LCR was 109% consistent with the prior quarter.
Turning to our net interest revenue and balance sheet trends on Page 5, which I will talk about in sequential terms. Net interest revenue was $698 million, up 3% sequentially. This increase reflects higher rates, as well as continued growth in loan balances, partially offset by lower cash and securities balances. Average deposit balances declined by 3%, while average interest earning assets were down 2% sequentially. Within net, loan balances were up nicely, about 3% sequentially.
Moving on to expenses on Page 6. Expenses for the quarter was $3 billion, up about 5.5% year-over-year and up 6% excluding notable items from last year. This increase primarily reflects investments net of efficiency savings and it also reflects higher revenue related expenses, which were partially offset by the favorable impact of the stronger U.S. dollar, a few additional details regarding noteworthy quarter-over-quarter expense variances. Staff expense was up 4% reflecting the annual vesting of long-term stock awards for retirement eligible employees. Distribution and servicing expenses up 5%, reflecting higher distribution cost associated with money market funds. And net occupancy expense was down 8% as we continue to optimize our real estate portfolio.
Turning to Page 7 for a closer look at our business segments. Security Services reported total revenue of $1.8 billion, flat compared to the prior year. Excluding the impact of the reduction related to Russia, revenue was up 4%. Fee revenue was down 5% and up 1% excluding the impact of Russia. And net interest revenue was up 6%, reflecting higher interest rates, partially offset by lower deposit balances.
As I discussed, the lines of business within our security services and market and wealth services segments, I will focus my comments on the investment services fees for each business, which you can find in our financial supplement. In Asset Servicing, investment services fees grew by 5%, primarily reflecting higher market values and net new business, partially offset by slightly lower transaction activity from existing clients. As Todd mentioned earlier, our sales momentum continues to be strong compared to the first quarter of last year.
Our Issuer Services business was significantly impacted by the reduction related to Russia. investment services fees were down 43%. Specifically, we accelerated amortization of deferred costs for depository receipt services of Russian companies, which is a contra-revenue item. Excluding this impact, investment services fees were down approximately 9% and this primarily reflects lower depositary receipt fees and the impact of lost business in the prior year in Corporate Trust.
Next, Market and Wealth Services on Page 8. Market and Wealth Services reported total revenue of $1.2 billion, flat compared to the prior year. Fee revenue was also flat. And net interest revenue was up 2%, reflecting higher interest rates and higher loan balances, partially offset by lower deposit balances. In Pershing, investment services fees were down 6%. This reflects the impact of lost business in the prior year, as well as lower transaction activity versus a very active first quarter of last year, partially offset by the impact of higher market values.
Pershing continue to deliver solid underlying growth. Clearing accounts continue to grow at a 4% annualized growth rate and we gather net new assets of $18 billion in the quarter. In Treasury Services, investment services fees were up 4%, as a business, our growth from both new and existing clients and continue to gain traction in higher margin products such as digital payments. And in Clearance and Collateral Management, investment services fees were up 8%, reflecting both higher tri-party collateral management balances, as well as higher clearance volumes.
Now turning to Investment and Wealth Management on Page 9. Investment and Wealth Management reported total revenue of $964 million down 3%. Fee revenue was also down 3%. Investment and other revenue was a negative $8 million and included losses on seed capital. And net interest revenue was up 19%, reflecting higher interest rates as well as higher deposits and loan balances.
As mentioned earlier, we ended the quarter with assets under management of $2.3 trillion, up 2% year-over-year. This increase primarily reflects the benefit of cumulative net inflows into both cash and long-term products as well as higher market values, partially offset by the unfavorable impact of the stronger U.S. dollar. As it relates to flows in the quarter, we saw $1 billion of net outflows from long-term products and $11 billion of net outflows from cash. Having said that, LDI, continue to be a bright spot with $17 billion of net inflows.
In Investment Management revenue was down 6%. Higher market values were more than offset by lower seed capital results and lower equity income, as well as the unfavorable impact of the stronger U.S. dollar, which is more impactful in Investment Management given that approximately 50% of our revenue is earned in foreign currencies. Wealth Management revenue grew by 4%, primarily reflecting higher net interest revenue and higher market values. Client assets of $305 billion were up 4% year-over-year, reflecting higher market and cumulative net inflows. And we continue to see healthy growth in both deposits and loans, as we've expanded our banking offering and deepened our client relationship.
Page 10 shows the results of the other segment. I will close with an update on our outlook for the full year of 2022. Obviously, given the backdrop of geopolitical uncertainty, rapidly evolving global monetary policy and the continued overhang of the pandemic, the macroeconomic environment is very uncertain. For our outlook, we assume a scenario where interest rates follow the bullet curve and market value stay relatively flat to where they were at the end of the first quarter.
With this in mind, we project full year NIR are to be up roughly 13% compared to 2021 and that is in this assumption we expect the correlation between rates and deposit run-off to be consistent with what we have seen in the past. We now expect fee revenue to be up 4% to 5%. This includes a tailwind of about 5% from the reduction of fee waivers, organic growth of 1% plus and a 1% to 2% headwind from the impact of Russia, market values, currency and other factors. For expenses ex notable items, we now expect an increase of approximately 5%, slightly lower than our previous guidance.
With regards to capital management, we've taken a number of actions to reposition our portfolio to reduce the impact of higher rates and credit spreads. For example, with lower duration in the AFS portfolio, reduced credit exposure and moved assets to HTM. these actions have reduced our AOCI rate sensitivity by about 25% going forward. Having said that, we remain cautious on buybacks in the near term. And based on the environment we described earlier, We ultimately expect to return at least 75% of earnings to shareholders this year. We do continue to expect to return close to 100% of earnings to our shareholders over time. Last but not least, we continue to expect our effective tax rate for the year to be approximately 19%.
With that operator, can you please open the line for questions.
