Investors flee Bank of New York Mellon

Bank of New York Mellon Corp., which so far has avoided the worst of the credit crisis, saw its stock plunge 27% on today as investors bet that it will be the next bank to report big problems.
In response, the bank quickly announced that it will release fourth-quarter and full-year results at 5 p.m. today — two days ahead of schedule.
Analysts surveyed by Thomson Reuters are expecting profits to come in at 70 cents a share, somewhat below the year-earlier period’s 77 cents.
But a nasty surprise from BoNY rival State Street Corp. suggests significantly tougher times may loom.
Boston-based State Street on Tuesday reported a 71% drop in fourth-quarter earnings and said it expects 2009 results to be flat.
The news startled investors largely because, like BoNY, State Street had so far sailed through the financial crisis unscathed.
Rather than make lots of mortgage or credit card loans like others banks, BoNY and State Street are in the arcane but lucrative business of storing other banks’ securities, keeping records and other administrative tasks. State Street and BoNY are also big money managers, and that was the source of State Street’s problem, as it reported $6.3 billion of losses from bond investments and another $3.6 billion in unrealized losses in assets held in off-balance sheet vehicles known as conduits.
The dismal news showed investors that the rot in the banking system reaches far wider than most people thought even a week ago, and that a turnaround is months away—if not longer.
“We remain cautious on financials…(the) ultimate loss experience will be far worse than current expectations,” warned Oppenheimer & Co. analyst Meredith Whitney in a report to clients Tuesday.
Shares in other big banks also fell sharply Tuesday, with J.P. Morgan Chase down 15%; and Citigroup down 12%.
The drop in BoNY’s stock was the worst one-day drop since shortly after Lehman Brothers collapsed in September. J.P. Morgan and Citigroup both moved up their earnings announcements last week so they could share mostly dismal news with investors faster.