Results of Operations; Quantitative and Qualitative Disclosures about Market Risk.

Certain business terms used in this document are defined in the glossary included in our 2007 Annual Report on Form 10-K.

Overview

Our businesses

The Bank of New York Mellon Corporation (NYSE: BK) is a global leader in providing a comprehensive array of services that enable institutions and individuals to manage and service their financial assets in more than 100 markets worldwide. We have a long tradition of collaborating with clients to deliver innovative solutions through our core competencies: asset and wealth management, securities servicing and treasury services. Our extensive global client base includes a broad range of leading financial institutions, corporations, government entities, endowments/foundations and high-net-worth individuals. One of our two principal subsidiaries, The Bank of New York (the "Bank"), founded in 1784, is the oldest bank in the United States. Our other principal subsidiary, Mellon Bank, N.A. ("Mellon Bank") was founded in 1869. Both institutions have consistently played a prominent role in the evolution of financial markets worldwide.

BNY Mellon's businesses benefit from the global growth in financial assets. Our success is based on continuing to provide superior client service, strong investment performance and the highest fiduciary standards. We seek to deploy capital effectively to our businesses to accelerate their long-term growth and deliver top-tier returns to our shareholders. Our long-term financial goals are focused on achieving superior total returns to shareholders by generating first quartile earnings per share growth over time relative to a group of 12 peer companies. Key components of this strategy include: providing the best client service versus peers (as measured through independent surveys); strong investment performance (relative to investment benchmarks); above median revenue growth (relative to peer companies for each of our businesses); competitive margins; and positive operating leverage.

Based on the growth opportunities in our businesses, we expect that an increasing percentage of our revenue and income will be derived outside the U.S.

As measurements of efficiency, over time we expect to increase both our level of fee revenue per employee and pre-tax margins.

We believe that our businesses are compatible with our strategy and goals for the following reasons:

† Demand for our products and services is driven by market and demographic trends in the markets in which we compete. These trends include: growth in worldwide retirement and financial assets; the growth and concentration of the wealth segments; global growth in assets managed by financial institutions; and the globalization of the investment process.

† Many of our products complement one another.

† We are able to leverage sales, distribution and technology across our businesses, benefiting our clients and shareholders.

† The revenue generated by our businesses is principally fee-based.

† Our businesses generally do not require as much capital for growth as traditional banking.

We pursue our long-term financial goals by focusing on organic revenue growth, expense management, superior client service, successful integration of acquisitions and disciplined capital management.

We have established a Tier I capital target of 8% as our principal capital measure. We have also established a secondary target capital ratio of 5% for adjusted tangible common equity. The adjusted tangible common equity ratio reflects the impact of the merger with Mellon and associated goodwill, intangibles and deferred tax liability. The goodwill and intangibles created in the merger have no economic impact but reduce tangible equity. For a discussion of our capital ratios, see pages 48-50.

Items 2. and 3. Management's Discussion and Analysis of Financial Condition and

Results of Operations; Quantitative and Qualitative Disclosures about Market Risk. (continued)

How we reported results

All information in this Quarterly Report on Form 10-Q is reported on a continuing operations basis, unless otherwise noted. For a description of discontinued operations, see Note 4 in the Notes to Consolidated Financial Statements.

Certain amounts are presented on a fully taxable equivalent (FTE) basis. We believe that this presentation allows for comparison of amounts arising from both taxable and tax-exempt sources and is consistent with industry practice. The adjustment to an FTE basis has no impact on net income. In addition, results for the first quarter of 2008 and fourth quarter of 2007 reflect the results of The Bank of New York Mellon combined. Results for the first quarter of 2007 include legacy The Bank of New York only.

In the first quarter of 2008, we adopted Statement of Financial Accounting Standards ("SFAS") No. 157 Fair Value Measurements ("SFAS 157") and SFAS No. 159 Fair Value Option ("SFAS 159"). For a discussion of SFAS 157 and SFAS 159, see Note 12 and Note 13 in the Notes to Consolidated Financial Statements.

First quarter 2008 highlights

We reported first quarter net income of $746 million, or $0.65 per share, and income from continuing operations of $749 million, or $0.65 per share. This compares to net income of $434 million, or $0.60 per share, and income from continuing operations of $437 million, or $0.61 per share, in the first quarter of 2007. The first quarter of 2008 included merger and integration expenses of $126 million (pre-tax), or $0.07 per share. The first quarter of 2007 included merger and integration expenses of $15 million (pre-tax) or $0.01 per share. Excluding these amounts, earnings per share from continuing operations were $0.72 in the first quarter of 2008 and $0.62 in the first quarter of 2007.

Adjusting for the impact of merger and integration expenses ($126 million pre-tax) and intangible amortization ($122 million pre-tax), diluted earnings per share for the first quarter of 2008 were $0.78, which compares to $0.65 a year ago (an increase of 20%) and $0.74 sequentially (an annualized increase

of 5%). See the table on page 55 for a reconciliation of GAAP to non-GAAP net income and earnings per share.

The results for the first quarter of 2008 included net pre-tax costs associated with the write down of certain investments in the securities portfolio ($74 million), the write-down of seed capital investments related to a formerly affiliated hedge fund manager ($25 million), and an expense associated with capital support agreements ($12 million). The results for the first quarter also included the pre-tax benefit of $42 million associated with the initial public offering by VISA. The net impact of these items decreased earnings per share by approximately $0.04.

Performance highlights for the first quarter of 2008 included:

† Assets under management totaled $1.105 trillion at March 31, 2008 compared with $142 billion at March 31, 2007. Assets under custody and administration totaled $23.1 trillion at March 31, 2008 compared with $15.9 trillion at March 31, 2007. Both increases primarily resulted from the merger with Mellon;

† Asset and wealth management fees totaled $842 million in the first quarter of 2008 compared with $151 million in the first quarter of 2007. The increase reflects the merger with Mellon as well as the benefit of strong money market flows and other new business, partially offset by the prior loss of business at one of our investment boutiques and lower equity market values;

† Asset servicing revenue was $897 million in the first quarter of 2008 compared with $393 million in the first quarter of 2007. The increase was primarily due to the merger with Mellon, the benefit of market volatility, strong new business activity and the fourth quarter of 2007 acquisition of the remaining 50% interest in BNY Mellon Asset Servicing B.V., the former joint venture with ABN AMRO;

† Issuer services revenue was $376 million in the first quarter of 2008 compared with $319 million in the first quarter of 2007. The increase primarily reflects the merger with Mellon as well as higher global corporate trust fees;

6 The Bank of New York Mellon Corporation

Items 2. and 3. Management's Discussion and Analysis of Financial Condition and

Results of Operations; Quantitative and Qualitative Disclosures about Market Risk. (continued)

† Revenue from foreign exchange and other trading activities was $259 million in the first quarter of 2008 compared with $127 million in the first quarter of 2007. The increase reflects the merger with Mellon, the benefit of increased client volumes and currency volatility;

† Securities losses totaled $73 million in the first quarter of 2008 compared to a gain of $2 million in the first quarter of 2007. The first quarter of 2008 includes a $28 million loss related to securities backed by home equity lines of credit in the portfolio of Three Rivers Funding Corporation
("TRFC"), a $24 million loss related to asset-backed securities ("ABS") collateralized debt obligations ("CDOs") and $22 million related to structured investment vehicles ("SIVs");

† Net interest revenue was $767 million in the first quarter of 2008 compared with $427 million in the first quarter of 2007. The increase was primarily due to the merger with Mellon as well as a higher level of interest-earning assets associated primarily with the growth in Securities Servicing and wider spreads on investment securities, partially offset by the lower value of noninterest-bearing deposits in a declining interest rate environment; and

† Noninterest expense was $2.619 billion in the first quarter of 2008 compared with $1.272 billion in the first quarter of 2007. The increase resulted from the merger with Mellon and in support of business growth as well as increases in merger and integration expense of $111 million and intangible amortization expense of $94 million, partially offset by $118 million of merger-related synergies generated in the first quarter of 2008.

Revenue overview

The vast majority of BNY Mellon's revenue consists of fee and other revenue, given our mix of businesses, with net interest revenue comprising the balance.

Fee and other revenue represented 79% of total revenue, on an FTE basis in the first quarter of 2008, compared with 77% in the first quarter of 2007.

Since fee and other revenue constitutes the majority of our total revenue, we discuss it in greater detail by type of fee in the fee and other revenue and the business segments sections. In these sections, we note the more specific drivers of such revenue and the factors that caused the various types of fee and other revenue to increase or decline in the first quarter of 2008 compared with the first quarter of 2007. The business segments discussion combines, for each business segment, all types of fee and other revenue generated directly by that segment as well as fee and other revenue transferred between segments under revenue transfer agreements, with net interest revenue generated directly by or allocated to that segment. The discussion of revenue by business segment is fundamental to an understanding of BNY Mellon's results as it represents a principal measure by which management reviews the performance of our businesses compared with performance in prior periods, with our operating plan and with the performance of our competitors.

Net interest revenue comprised 21% of total revenue, on an FTE basis, in the first quarter of 2008 compared with 23% the first quarter of 2007. Net interest revenue is generated from a combination of loans, investment securities, interest-bearing deposits with banks and federal funds sold and securities purchased under resale agreements. For more information, see the net interest revenue section.

Items 2. and 3. Management's Discussion and Analysis of Financial Condition and

Results of Operations; Quantitative and Qualitative Disclosures about Market
Risk. (continued)





Sector/segment overview



Sector/Segment                       Primary types of fee revenue
Asset & Wealth Management sector
  Asset Management segment           †    Asset and wealth management fees from:
                                     Institutional clients
                                     Mutual funds
                                     Private clients

  Asset Servicing segment            †    Asset servicing fees, including:
                                     Institutional trust and custody fees
                                     Broker-dealer services
                                     Securities lending
                                     †    Foreign exchange
  Issuer Services segment            †    Issuer services fees, including:
                                     Corporate trust
                                     Depositary receipts
                                     Employee investment plan services
                                     Shareowner services
  Clearing & Execution Services      †    Clearing and execution services fees,
segment                              including:
                                     Broker-dealer and Registered Investment
                                     Advisor services
  Treasury Services segment          †    Treasury services fees, including:
                                     Global payment services
                                     Working capital solutions
                                     †    Financing-related fees
Other segment                        †    Leasing operations
                                     †     Corporate treasury activities
                                     †    Business exits
                                     †    Global markets and institutional
                                     banking services
                                     †    Merger and integration expenses

8 The Bank of New York Mellon Corporation

Items 2. and 3. Management's Discussion and Analysis of Financial Condition and

Results of Operations; Quantitative and Qualitative Disclosures about Market Risk. (continued)

Fee and other revenue

Fee and other revenue

                                                                                           1Q08     1Q08
(dollars in millions unless otherwise                                                       vs.      vs.
noted)                                         1Q08         4Q07         1Q07 (a)          4Q07     1Q07
Securities servicing fees:
Asset servicing                               $   897      $   809      $      393           11%     128%
Issuer services                                   376          438             319         (14)      18
Clearing and execution services                   267          314             282         (15)      (5)
Total securities servicing fees                 1,540        1,561             994          (1)      55
Asset and wealth management fees                  842          887             151          (5)     458
Performance fees                                   20           62              14         (68)      43
Foreign exchange and other trading
activities                                        259          305             127         (15)     104
Treasury services                                 124          121              50           2      148
Distribution and servicing                         98          113               2         (13)     N/M
Financing-related fees                             48           52              52          (8)      (8)
Investment income                                  23           52              36         (56)     (36)
Securities gains (losses)                         (73 )       (191 )             2         N/M      N/M
Other                                              97           82              47          18      106
Total fee and other revenue                   $ 2,978      $ 3,044      $    1,475          (2)%     102%

Fee and other revenue as a percentage of
total revenue (FTE)                               79%          80%             77%

Market value of assets under management at
period-end (in billions)                      $ 1,105      $ 1,121      $      142          (1)%     678%
Market value of assets under custody and
administration at period-end
(in trillions)                                $  23.1      $  23.1      $     15.9  (b)       -%      45%

(a) Legacy The Bank of New York only.

(b) Revised for Acquired Corporate Trust Business and harmonization adjustments.

N/M - Not meaningful.

Fee and other revenue

The results of many of our businesses are influenced by client and market activities that vary by quarter. For instance, we experience seasonal increases in securities lending and depositary receipts reflecting European dividend distributions during the second quarter of the year, and to a lesser extent, in the fourth quarter of the year. Performance fees tend to be seasonally highest in the fourth quarter when the measurement period for many products ends.

The increase in fee and other revenue versus the year-ago quarter primarily reflects the merger with Mellon, higher securities servicing fees and foreign exchange and other trading activities. The first quarter 2008 also includes, in other fee revenue, a $42 million gain associated with the initial public offering by VISA. The sequential-quarter decrease in fee and other revenue primarily reflects seasonal declines in the Depositary Receipts business and performance fees, the sale of the B-Trade and G-Trade execution businesses in Clearing and execution services, lower foreign exchange and other trading activities revenue, and lower investment

income, partially offset by higher asset servicing fees.

Securities servicing fees

The increase in securities servicing fees over the first quarter of 2007 reflects the merger with Mellon and strong securities lending revenue. Securities servicing fees were down sequentially reflecting lower issuer services fees reflecting a seasonal decline in the Depositary Receipts business, and lower clearing and execution service fees due to the first quarter 2008 sale of the B-Trade and G-Trade execution businesses. These decreases were partially offset by higher securities lending revenue. See the "Institutional Services Sector" in "Business segments review" for additional details.

Asset and wealth management fees

Asset and wealth management fees increased from the first quarter of 2007 primarily due to the merger with Mellon as well as strong money market flows and other new business, partially offset by the prior loss of business at one of our investment boutiques, as well as lower equity market values. The decrease

Items 2. and 3. Management's Discussion and Analysis of Financial Condition and

Results of Operations; Quantitative and Qualitative Disclosures about Market Risk. (continued)

compared to the fourth quarter of 2007 primarily resulted from a combination of lower equity market values and negative long-term flows. See the "Asset and Wealth Management Sector" in "Business segments review" for additional details regarding the drivers of asset and wealth management fees.

Total assets under management for the Asset and Wealth Management sector were $1.105 trillion at March 31, 2008, compared with $142 billion at March 31, 2007 and $1.121 trillion at Dec. 31, 2007. The increase compared with March 31, 2007 resulted from the merger with Mellon, new business and strong money market inflows. The decrease compared with Dec. 31, 2007 primarily resulted from lower equity market values primarily offset by strong money market inflows.

A significant portion of asset and wealth management fees are generated in the Asset Management segment from managed mutual funds. These fees are based on the daily average net assets of each fund and the basis point management fee paid by that fund. Managed mutual fund revenue was $323 million compared with $3 million in the first quarter of 2007. The increase resulted from the merger with Mellon and strong money market inflows.

Performance fees

Performance fees, which are reported in the Asset Management segment, are generally calculated as a percentage of a portfolio's performance in excess of a benchmark index or a peer group's performance. There is an increase/decrease in incentive expense with a related change in performance fees. Performance fees increased $6 million compared with the first quarter of 2007 and decreased $42 million compared with the fourth quarter of 2007. The increase compared with the first quarter of 2007 reflects the merger with Mellon, partially offset by a lower level of performance fees generated from alternative and other quantitative products. The sequential quarter decrease principally reflects a typical seasonal decline.

Foreign exchange and other trading activities

Foreign exchange and other trading activities revenue, which is reported primarily in the Asset Servicing segment, increased by $132 million, or 104%, to $259 million compared with the first

quarter of 2007, and decreased 15% (unannualized) compared with the fourth quarter of 2007. The increase compared to the first quarter of 2007 was due to the merger with Mellon and also reflected the benefit of significant increases in currency volatility as well as higher client volumes. The decrease compared with the fourth quarter of 2007 primarily reflects a lower valuation of the credit derivatives portfolio and the impact of the adoption of SFAS 157 on the valuation of the interest rate derivatives portfolio.

Treasury services

Treasury services, which is primarily reported in the Treasury Services segment, includes fees related to funds transfer, cash management and liquidity management. Treasury services fees increased $74 million from the first quarter of 2007 reflecting the merger with Mellon as well as higher global payment and cash management fees due primarily to higher client volumes.

Distribution and servicing fees

Distribution and servicing fees earned from mutual funds are primarily based on average assets in the funds and the sales of funds managed or administered by BNY Mellon and are primarily reported in the Asset Management segment. These fees, which include 12b-1 fees, fluctuate with the overall level of net sales, the relative mix of sales between share classes and the funds' market values.

The $96 million increase in distribution and servicing fee revenue in the first quarter of 2008

compared with the first quarter of 2007 primarily reflects the merger with Mellon. The $15 million decrease compared with the fourth quarter of 2007 reflects higher redemption fees received in the fourth quarter of 2007. The impact of distribution and servicing fees on income in any one period can be more than offset by distribution and servicing expense paid to other financial intermediaries to cover their costs for distribution and servicing of mutual funds. Distribution and servicing expense is recorded as noninterest expense on the income statement.

10 The Bank of New York Mellon Corporation

Items 2. and 3. Management's Discussion and Analysis of Financial Condition and

Results of Operations; Quantitative and Qualitative Disclosures about Market Risk. (continued)

Financing-related fees

Financing-related fees, which are primarily reported in the Treasury Services segment, include capital markets fees, loan commitment fees and credit-related trade fees. Financing-related fees decreased $4 million from both a year-ago quarter and sequentially reflecting a lower level of credit-related activities consistent with our strategic direction.

Investment income

Investment income, which is primarily reported in the Other and Asset Management segments, includes the gains and losses on private equity investments and seed capital investments, income from insurance contracts, and lease residual gains and losses. The decreases in investment income from the first quarter of 2007 and the fourth quarter of 2007 primarily resulted from seed capital investment losses of $19 million in the first quarter of 2008 as well as lower private equity investment revenue. The first quarter of 2008 excludes the $25 million loss on seed capital investments related to a formerly affiliated hedge fund manager, which was recognized in other expense. Private equity investment income was $7 million in the first quarter of 2008, down from $14 million in the fourth quarter of 2007 and $17 million in the first quarter of 2007.

Securities gains (losses)

Securities losses totaled $73 million in the first quarter of 2008 compared to a gain of $2 million in the first quarter of 2007 and a loss of $191 million in the fourth quarter of 2007. The losses in the first quarter of 2008 primarily reflected $24 million related to ABS CDOs, $22 million related to SIVs and $28 million related to securities backed by home equity lines of credit in the TRFC portfolio. The loss in the fourth quarter of 2007 included a $200 million CDO write-down. See Consolidated balance sheet review for further information on the investment securities portfolio.

Other revenue

Other revenue is comprised of expense reimbursements from joint ventures, merchant card fees, asset-related gains, equity investment income, net economic value payments and other transactions. Expense reimbursements from joint ventures relate to expenses incurred by BNY Mellon on behalf of joint ventures. Asset-related gains include loan, real estate dispositions and other assets. Equity investment income primarily reflects our proportionate share of the income from our investment in Wing Hang Bank Limited. Other transactions primarily include low income housing, other investments and various miscellaneous revenues. The breakdown among these categories is shown in the following table:

    Other revenue                                         Quarter ended
                                                 March 31,   Dec. 31,   March 31,
    (in millions)                                     2008       2007    2007 (a)
    Asset-related gains                                $46        $ 5         $ 4
    Equity investment income                            12         18          13
    Merchant card fees                                   6         10           -
    Expense reimbursements from joint ventures           4         27           -
. . .