Shares fell 3.8 percent to $20.86 in mid-morning Wednesday trading.
"It was a challenging revenue quarter, as general uncertainty in the financial markets resulted in lower-than-normal levels of client activity fourth quarter," CEO Gerald L. Hassell said in a statement.
Financial institutions that derive a large portion of their revenue from custody and trust banking -- an area of banking that deals with managing corporate treasuries and making sure fixed-income obligations are met - tend to fare poorly in a low interest-rate environment. As the U.S. Federal Reserve has kept its main lending rate close to zero since 2009, margins at BNY Mellon, and competitors like State Street (NYSE:STT) and Northern Trust (NASDAQ:NRTS), have eroded.
Boston-based State Street also missed earnings estimates for the fourth quarter in its results also announced Wednesday. Its shares felll more than 7 percent.
The slowdown in the volume of trading increased last quarter as institutional investors bolted from the market, adding increased downward pressure to BNY's bottom line. While all revenue line-items fell, the biggest hit was to a category known as "Issuer Services," which includes managing assets for depositary receipts. That business was particularly affected by the downturn in market volume.
Return on common equity, a measure of how much the bank earned on all assets under management, plummeted to 5.9 percent, from 8.5 percent in 2010.
While the New York-based bank lowered costs by laying off workers - it had 900 fewer employees than in the third quarter or nearly 2 percent of the total payroll - it experienced increased costs as a result of restructuring, which it described as "related to efficiency initiatives." It also experienced a less favorable tax rate than a year ago.
While Bank of New York Mellon was unable to capitalize on growth, one bright spot from the report was that assets under management rose 8 percent to $1.26 billion from the year-earlier quarter.