Dermot McDonogh
Chief Financial Officer at Bank of New York Mellon
Thank you, Robin, for the introduction and good morning, everyone. It's a privilege to be here and I look-forward to working with you all. I'll start on page three of the presentation with some additional details on our consolidated financial results in the first quarter. Total revenue was $4.4 billion, up 11% Year-over-Year. This reflects fee revenue being flat as headwinds from lower market values, a stronger dollar and the sale of Alcentra which closed in November last year were offset by a significant improvement in fee waivers and the absence of a notable item last year related to Russia.
Firmwide assets under custody and-or administration of $46.6 trillion increased by 2% Year-over-Year. Growth from new and existing clients, more than offset the stiff headwinds from lower market values and currency translation a real testament to the strength and diversification of our franchise. Quarter-over quarter assets under custody and-or administration increased by 5%. Assets under management of $1.9 trillion, decreased by 16% Year-over-Year. Here the impact of lower market values and the stronger dollar was tempered by cumulative net inflows over the 12 months.
Quarter-over quarter assets under management increased by 4%. Investment and other revenue was $79 million and included another strong quarter of fixed-income trading on the back of elevated volatility and greater demand for U.S. treasury. And net interest revenue increased by 62% Year-over-Year, primarily reflecting higher interest rates. Expenses were up 3%, driven by higher investments and revenue-related expenses partially offset by efficiency savings and the impact of the sale of Alcentra. The impact of inflation and merit [Phonetic] increases were largely offset by the favorable impact of the stronger dollar. And provision for credit losses $27 million in the quarter reflecting changes in the macroeconomic forecast. As Robin mentioned earlier, earnings per share were $1.12 of 30% Year-over-Year, are up 20%, excluding notable items, largely in the first quarter of last year. Our unfortunate pre-tax margin was 28% and our return on tangible common equity was 20%, the highest in three years.
Turning to capital and liquidity on Page 4. Our Tier-one leverage ratio, which continues to be our binding capital constraints with 5.8%, essentially flat quarter-over quarter. And our CET1 ratio was 11%. The strength of our balance sheet and our healthy earnings generation in the quarter allowed us to return 1.6 billion of capital to our common shareholders, including $1.3 billion of common share repurchases while maintaining our capital ratios well-above regulatory minimums and above our more stringent management target.
Similarly on liquidity, our liquidity coverage ratio was 118%, also unchanged compared with the prior quarter. The strength of our highly liquid lower credit risk and well-capitalized balance sheet is one of the cornerstones of our franchise. Starting in late '21 and throughout '22, we proactively reduced the duration and enhance the risk and liquidity profile of our investment securities portfolio, while consistently keeping over 60% of the book available-for-sale to position ourselves with ample flexibility for changing market and interest-rate condition.
Between the beginning of this year and early March, we saw deposit balances declined in-line with typical seasonal patterns and in-line with our expectations, considering continued central bank tightening by both rate hikes and quantitative tightening. This was followed by a swift increase in deposit balances as [Indecipherable] strength of our balance sheet during the recent turmoil in the banking sector. We ended the quarter with deposit balances up 1% sequentially, on a period-end basis, but we expect continued moderation of deposit levels in the months ahead.
Now moving on to net interest revenue and further details on the underlying balance sheet trends on Page five, which I will describe in sequential terms. Net interest revenue of $1.1 billion was up 7% quarter-over quarter. This sequential increase reflects higher yields on interest-earning assets, partially offset by higher funding costs and the impact of balance sheet size and mix. While [Phonetic] it's clearly a very volatile quarter related to [Phonetic]markets, it is worth noting that on average realized rates were in-line with our projections for the quarter. Our outperformance compared to our prior expectations was primarily driven by slightly lower-than-expected deposit basis [Phonetic].
On a quarterly average basis, deposit balances decreased by 3% sequentially. Noninterest-bearing deposits represented 26% of total deposit balances which continues to be above our long-term range of 20% to 25% based on historical averages in normal interest-rate environment. Average extracting assets decreased by 1% quarter-over quarter. Underneath that cash and reverse repo class [Phonetic] loan balances were down 6% and our investment securities portfolio was flat.
Moving on to expenses on Page 6. Expenses for the quarter were $3.1 billion up 3% Year-over-Year. As mentioned earlier, this reflects investments in higher revenue-related expenses. Partially offset by efficiency savings and the impact of the sale of Alcentra. The impact of inflation and merit increases was largely offset by the favorable impact of the stronger dollar. Robin has been clear about our determination to bend the cost curve. We're executing with discipline and urgency as you can see signs of our delivery and our professional, legal and other purchase services, net occupancy and business development [Indecipherable]. We feel good about our progress in the first quarter and how it positions us for efficiency savings in the coming quarters to help us meet our goals for the year.
Turning to our business segments, let's start with Securities Services on Page 7. As I discuss the performance of our Securities Services and Market and Wealth Services segments, I will comment on the investment services fees for each line-of-business described in our earnings press release and with [Phonetic] the financial supplement. Security Services reported total revenue of $2.1 billion, up 19% Year-over-Year. Fee revenue was up 4%. Within this FX revenue was down 6% as the benefit of higher volatility was more than offset by a decline in emerging market volume. And net interest revenue was up 77%.
In Asset Servicing investment services fees decreased by 5%. The benefit of lower money market fee waivers and net-new business was more than offset by the impact of lower market values, lower client activity and the stronger dollar. In Issuer Services, investment services fees increased by 67%, this increase largely reflects the absence of the notable item last year related to Russia, as well as lower money market fee waivers in Corporate Trust.
Next, Market and Wealth Services on Page 8. Market and Wealth Services reported total revenue of $1.5 billion, up 22% Year-over-Year. Fee revenue was up 10% and net interest revenue increased by 53%. Encouraging investment services fees were up 15% primarily driven by the abatement of money market fee waivers, partially offset by lower client activity. Net-new assets were healthy $37 billion in the quarter, and average active clearing accounts were up 6% year-on year.
In Treasury Services, investment services fees decreased slightly by 1%, driven by higher earnings, credit on non-interest-bearing deposit balances on the back of higher interest rates, partially offset by lower money market fee waivers and net-new business. And in clearance and Collateral Management investment services fees were up 7%, largely reflecting higher U.S. government clearance volumes, and we [Phonetic] continued demand for U.S. Treasuries.
Moving on to Investment and Wealth Management, on Page 9. Investment and Wealth Management reported total revenue of $827 million, down 14% Year-over-Year. Fee revenue was down 15%. Investment and other revenue was $6 million in the quarter, primarily reflecting fee capital gain as opposed to losses in the first quarter of last year, and net interest revenue was down 21% Year-over-Year.
Assets under management of $1.9 trillion, decreased by 16% year-over-year. As I mentioned earlier, this decrease largely reflects lower market values and the unfavorable impact of the stronger dollar, partially offset by cumulative net inflows. In the quarter, we saw $5 billion of net inflows into long-term products. We continue to see healthy net inflows into our LDI strategies of $10 billion and we also saw $4 billion of net inflows into our fixed-income strategy. In cash, we expected outflows from a small number of clients. This was offset by healthy inflows on the back of our continued strong investment performance.
In Investment Management revenue was down 15% year-over-year. This decrease reflects the impact of the sale of Alcentra, the mix of cumulative net inflows, lower market value and the stronger dollar and was partially offset by lower money market fee waivers. In Wealth Management revenue was down 12% driven by lower market values and changes in-product mix. Client assets of $279 billion were down 9% Year-over-Year, primarily driven by lower market values. Page 10 shows the results of the other segments.
I'll close with a few comments on how we're currently thinking about our financial outlook for the year, which in short remains basically unchanged. From our earnings call in January, you will recall that based on March implied forward interest rates at the end of last year, we projected an approximately 20% year-over-year increase in net interest revenue for the full year '23.
As you all know, we continue to see significant volatility in rates, markets and market implied forward interest rates currently suggest some meaningful fed easing relative to the dock plots [Phonetic]. We have positioned ourselves for continued interest rate volatility and retained ample flexibility and liquidity to respond to a wide range of outcomes as the ultimate impact of continued tightening remains uncertain.
We're off to a good start in the first quarter and based on March implied forward interest rates at the end of March, we still believe our outlook for 20% year-over-year growth in net interest revenue is realistic with some skew to the upside. We also still expect expenses, excluding notable items to be up 4% year-over-year, assuming foreign exchange rates at the end of last year or by approximately 4.5% on a constant currency basis. As we said on our earnings call in January, we are determined to deliver some positive operating leverage this year.
We still expect an effective tax rate in the 21% to 22% range and finally, as we calibrate the amount and pace of our continuing share repurchases in the weeks and months ahead, we will be mindful of the continued uncertainty in the operating environment, especially as it relates to the uncertain path of interest rates and so we're planning to maintain our current more conservative capital buffers for the time being.
So to wrap up, we're pleased with the Company's solid financial performance in the first quarter which have made a challenging operating environment once again showcased the strength and resilience of our business model. As we look forward, we are continuing to manage our balance sheet conservatively and we are confident that we are well positioned to help our clients navigate the elevated uncertainty in global markets.
With that, operator, can you please open the line for Q&A.
