BNY Mellon Launches $500 Million Perpetual Preferred Stock Offering With 6.15% Initial Dividend Rate

Capital Raising Strategy and Offering Structure

The Bank of New York Mellon Corporation filed a prospectus supplement on July 16, 2026, outlining the terms of its Series N Noncumulative Perpetual Preferred Stock offering. The disclosure reveals a structured capital raise designed to strengthen the company's balance sheet through the issuance of perpetual preferred securities. The offering consists of 500,000 depositary shares, each representing a proportional interest in an underlying preferred share with a $100,000 liquidation preference. This layered structure, utilizing depositary receipts, allows investors to trade and hold fractional interests in the preferred shares through a convenient book-entry mechanism.

The total gross offering size amounts to $500 million, with each depositary share priced at $1,000. The underwriting discount is set at $10 per share, resulting in net proceeds to the company of $990 per share, or approximately $495 million in aggregate. The filing indicates that expected delivery of the depositary shares is scheduled for approximately July 23, 2026, through The Depository Trust Company and its participants, including Clearstream Banking and Euroclear Bank, marking a standard institutional settlement process for securities of this type.

Dividend Structure and Payment Terms

The announcement details a two-tiered dividend framework that establishes an initial fixed-rate period followed by variable reset periods. Investors in the Series N Preferred Stock will receive dividends accruing at a rate of 6.150% per annum on the $1,000 per-share liquidation value from the original issue date through September 19, 2031. These dividends will be payable in arrears on a quarterly schedule: March 20, June 20, September 20, and December 20 of each year, with the first dividend payment expected on December 20, 2026. The disclosure states that dividend payments are subject to certain legal and regulatory restrictions and are only payable when declared by the company's board of directors or an authorized committee and to the extent the company has legally available funds.

Beginning September 20, 2031, the dividend rate will transition to a floating-rate structure that resets every five years. The new rate will be calculated as the five-year Treasury rate as of the most recent reset dividend determination date plus 1.868%. This mechanism ties future dividend yields to broader market conditions and the Treasury curve, offering a degree of inflation or interest-rate protection to investors while also introducing rate uncertainty beyond the initial five-year period. The filing does not disclose the company's expected cost of capital or internal financing rationale for selecting this particular reset margin.

Redemption Rights and Call Provisions

BNY Mellon has retained significant flexibility in managing this preferred security through two distinct redemption pathways outlined in the disclosure. The company may redeem the Series N Preferred Stock in whole or in part on any dividend payment date on or after September 20, 2031, at a redemption price of $1,000 per depositary share plus any declared and unpaid dividends. This call provision becomes available only after the initial five-year fixed-rate period expires, providing the company with the option to refinance or retire the securities if capital market conditions prove favorable. Redemption at that point would be executed at the original liquidation preference with no premium, meaning the company faces no financial penalty for early retirement after the reset date.

Additionally, the filing discloses that BNY Mellon may redeem the entire series, but not in part, at any time within 90 days following a "Regulatory Capital Treatment Event," as defined in the prospectus supplement. This provision allows the company to respond swiftly to unfavorable changes in regulatory capital treatment that might reduce the value of the preferred stock as a capital instrument. A redemption under this scenario would also occur at the $1,000 per-share liquidation value plus accrued but unpaid dividends. If shares are redeemed, the depositary will redeem a proportionate number of depositary shares, ensuring investors receive the economic equivalent of the preferred stock redemption.

Dividend Rights and Preference Structure

The Series N Preferred Stock is structured as noncumulative, meaning that if BNY Mellon does not declare and pay a dividend in any quarter, that unpaid dividend is not carried forward or accumulated for future payment. Investors receive dividends solely to the extent declared by the board and only if the company maintains legally available funds for such payments. The filing emphasizes that dividend declaration and payment are discretionary, subject to the company's financial condition and regulatory constraints. This noncumulative feature distinguishes the security from cumulative preferred shares and introduces execution risk for income-focused investors.

The disclosure outlines that dividend payments on the Series N Preferred Stock are subject to legal and regulatory restrictions. These restrictions typically include limitations tied to the company's capital levels, earnings, and regulatory approval, particularly for bank holding companies like BNY Mellon that operate under Federal Reserve oversight. The prospectus supplement notes that further details on these restrictions are provided elsewhere in the document, though the core filing excerpt does not elaborate on specific regulatory thresholds or trigger events that might suspend or limit dividend payments.

Voting Rights and Governance Implications

The announcement states that the Series N Preferred Stock will not have any voting rights except as described elsewhere in the prospectus supplement. This lack of voting control aligns with standard preferred stock arrangements and ensures that existing common shareholders retain full voting control of the company. The absence of routine voting rights means that preferred stockholders cannot influence board elections, executive compensation decisions, or major strategic initiatives. However, the disclosure indicates that certain voting rights may apply under specific circumstances detailed in the full prospectus, likely relating to dividend suspension events or liquidation scenarios.

Holders of depositary shares will exercise all proportional rights and preferences of the underlying Series N Preferred Stock through the depositary mechanism. This indirect ownership structure means that depositary share holders do not directly hold or control shares but instead hold receipts evidencing their interest in shares held by the depositary. The arrangement simplifies trading and settlement but introduces an intermediary into the relationship between the investor and the underlying security, potentially adding operational or counterparty considerations.

Book-Entry Issuance and Trading Mechanics

The prospectus supplement confirms that the depositary shares will be issued in book-entry form only, meaning no physical certificates will be issued to investors. The Depository Trust Company will maintain the book-entry records for the shares, with participants including major international clearinghouses such as Clearstream Banking and Euroclear Bank. This structure facilitates rapid settlement and transfer of ownership while reducing administrative burden and the risk of loss or theft associated with physical securities. Settlement of the offering is expected to occur on or about July 23, 2026, in New York.

The filing discloses that the Series N Preferred Stock and the depositary shares will not be listed on any securities exchange or automated quotation system. This lack of exchange listing means that trading in the secondary market will be conducted over-the-counter, likely through broker-dealers and institutional networks rather than on a centralized exchange. The announcement further notes that neither the Series N Preferred Stock nor the depositary shares are bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, and they are not obligations of or guaranteed by any bank.

Underwriting Syndicate and Distribution Plans

The offering is jointly managed by a syndicate of five lead underwriters: Goldman Sachs & Co. LLC, J.P. Morgan, Morgan Stanley, RBC Capital Markets, and UBS Investment Bank. BNY Capital Markets is also listed as a joint book-running manager, indicating that BNY Mellon's own capital markets affiliate is participating in the underwriting. The underwriting discount of $10 per depositary share ($5 million in aggregate) compensates these underwriters for their role in marketing and distributing the securities to institutional and other eligible investors.

The disclosure notes that BNY Mellon's affiliates, including BNY Mellon Capital Markets, LLC, may use the prospectus supplement and accompanying prospectus in connection with offers and sales of the depositary shares in the secondary market after the initial offering. These affiliates may act as principal or agent in secondary transactions, meaning they may purchase shares for their own account or facilitate transactions on behalf of clients. Secondary market sales will be executed at prices related to prevailing market prices at the time of sale, subject to standard market conditions and liquidity.

Tax Considerations and Investor Eligibility Restrictions

The prospectus supplement includes a section addressing material United States federal income tax considerations for investors, though the specific tax treatment details are referenced as being provided elsewhere in the full documentation. Generally, holders of preferred stock are subject to taxation on declared dividends as ordinary income in the year received, subject to the preferential rate treatment available for qualified dividends received by individual U.S. taxpayers. The filing also includes guidance on certain ERISA (Employee Retirement Income Security Act) considerations relevant to employee benefit plan investors.

The announcement explicitly prohibits sales of the depositary shares to retail investors in the European Economic Area and the United Kingdom. The restriction specifies that no key information document required by European Union Regulation No 1286/2014 (the PRIIPs Regulation) has been prepared, making offers to EEA retail investors unlawful under that regulation. These geographic and investor-type restrictions limit the offering to institutional and professional investors meeting specified regulatory definitions, reflecting European regulatory requirements for complex securities.

Risk Disclosures and Investment Considerations

The prospectus supplement directs investors to a dedicated "Risk Factors" section beginning on page S-6 of the full disclosure document. While the specific risk factors are not detailed in the excerpt provided, typical risks associated with noncumulative perpetual preferred securities include dividend suspension risk, interest rate risk, liquidity risk, and regulatory capital treatment risk. Investors should be aware that as a noncumulative preferred stock, there is no guarantee that declared dividends will be paid if the company's capital or earnings fall below regulatory thresholds or if the board determines that legally available funds are insufficient.

The filing emphasizes that neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of the prospectus supplement. The company and underwriters state they take responsibility for the accuracy of information contained in the prospectus and have not authorized anyone else to provide additional information. Investors are cautioned that the prospectus information is current as of the filing date and that the financial condition and prospects of the company may have changed since the filing date.

Regulatory Environment and Capital Implications

The inclusion of a redemption provision tied to a "Regulatory Capital Treatment Event" suggests that BNY Mellon structured this security with awareness of evolving regulatory capital standards applicable to large banking organizations. As a systemically important financial institution, BNY Mellon operates under stringent capital requirements imposed by the Federal Reserve and the OCC (Office of the Comptroller of the Currency). Changes in how regulators treat perpetual preferred securities within Tier 1 capital calculations could trigger the company's redemption right, allowing management to retire the securities if regulatory treatment becomes unfavorable.

The offering announcement does not disclose the specific use of proceeds beyond noting that details are provided in the "Use of Proceeds" section of the prospectus. The company does not specify whether the capital will be retained for general corporate purposes, deployed into business expansion, used to fund acquisitions, or allocated to specific regulatory capital ratio targets. This information would typically be found in the full prospectus, which is incorporated by reference but not reproduced in the filing excerpt provided.