GLOBAL – Mellon Financial says it had an “exceptionally strong” performance in institutional asset management in the fourth quarter of 2003.

The comments came is it posted a 13% gain in net income for the period.

"Through a combination of an exceptionally strong performance by Institutional Asset Management, remaining on track to meet our profitability targets in Human Resources & Investor Solutions and the everyday execution of our strategy by all our employees, Mellon was able to deliver positive operating leverage in our core business sectors and generate top tier returns on shareholders' equity of 20.4% for the fourth quarter of 2003," said chairman and chief executive Martin McGuinn.

He added: "We are beginning 2004 with a better foundation for growth than 2003.”

“We are also cautiously optimistic based upon an improving economic outlook and stronger equity markets, both of which are key drivers for our fee-based businesses.

“During 2004 Mellon will continue to be focused on generating organic growth as well as aggressive expense management to deliver increasing returns to our shareholders."

The Pittsburgh-based company said that income from continuing operations rose 13% to 185 million dollars.

Total fee revenue rose nine percent to a record 981 million dollars – mostly due to higher investment management fees and institutional trust and custody fees.

Assets under management rose to a record 657 billion dollars at the end of December, from 625 billion dollars as at September 30.

Assets under administration or custody also increased to a record 2.845 trillion dollars – from 2.611 trillion dollars.

Investment management fee revenue in the period was up 19% at 413 million dollars. The rise included performance fees of 56 million dollars.

Institutional trust and custody fee revenue rose 16% to 132 million dollars. “The increase reflects the benefit of new business highlighted by the investment management outsourcing contract of a London-based client and improved market conditions.”

The group said it cut 1,600 staff, or seven percent of its payroll, during 2003.

Separately, Mellon said it has named Robert Triech as head of investment research at its Human Resources and Investor Solutions division. Mellon’s head of investment consulting, Paul Black, said the creation of the new position signalled the group’s ambition to grow its “investment consulting offering, by creating a dedicated investment research team”.