Fitch Affirms Bank of New York & Mellon Financial on Merger Announcement; Outlook to Positive

Business Wire, Dec 4, 2006

CHICAGO -- Fitch has affirmed all ratings of The Bank of New York Company, Inc. (NYSE:BK) and Mellon Financial Corporation (NYSE:MEL) and has assigned a Positive Outlook to the ratings of both companies. Beyond setting the Support rating at '2' for the combined operating companies, Fitch does not expect any other rating changes immediately after the close of the merger. These rating actions follow today's announcement that the two companies intend to merge. A complete list of ratings follows at the end of this release.

The transaction, when consummated, will make the combined company a dominant global securities servicing and asset management franchise. The combined company, to be named The Bank of New York Mellon Corporation, will be the largest global custodian by a considerable margin, with over $16 trillion of administered assets. It will also add MEL's extensive asset management and wealth management businesses to BK's corporate trust, depositary receipt correspondent clearing and government bond clearance activities. This combination of businesses will endow the new company with an extremely diverse business mix and leading positions in most businesses. Fitch believes that, over the long-term, there are substantial revenue synergy opportunities, particularly from cross-selling potential among the various business lines.

The management team of the two companies will be integrated, with MEL's CEO Robert Kelly serving as the CEO of the combined company and BK's CEO Thomas Renyi serving as Executive Chairman until his retirement in the latter half of 2008. The Board will have a substantial number of directors from both companies. Business lines will also be headed by executives from both companies, with the largest unit, asset servicing, having co-heads.

The transaction, which is expected to close in about six months, will be modestly dilutive to BK's stated earnings in 2007 but accretive thereafter. It will be immediately accretive to MEL's earnings. Cost savings are expected to be $700 million, or about 8% of combined expenses, and should be realized over three years. There will be restructuring charges of $1.3 billion, also to be recognized over three years. Management projects Tangible Common Equity to be approximately 4.2% at closing but will be rebuilt to a target level of 5% by 2Q08.

Fitch views merger integration, encompassing both system and cultural issues, as the primary challenge facing the combined company. Fitch believes, however, that the commanding franchise and strong earnings potential of the combined company could result in higher ratings after the merger is fully integrated; that is, over the next twelve to twenty-four months. Accordingly, Fitch has revised the Rating Outlook of both companies to Positive.

Ratings Affirmed, Rating Outlook Positive:

Bank of New York Company, Inc.

--Long-term Issuer default rating (IDR) 'AA-';

--Long-term senior 'AA-';

--Long-term subordinated 'A '.

The Bank of New York

--Long-term deposits 'AA';

--Long-term IDR 'AA-';

--Long-term senior 'AA-'.

Bank of New York (Delaware)

Bank of New York Trust Company, N.A.

--Long-term deposits 'AA';

--Long-term IDR 'AA-'.

Bank of New York Europe

--Long-term IDR 'AA-'.

BNY Capital I

BNY Capital IV

BNY Capital V

BNY Institutional Capital Trust A

--Trust Preferred Securities 'A '.

Mellon Financial Corporation

--Long-term Issuer Default Rating (IDR) 'AA-';

--Long-term subordinated debt 'A ';

--Long-term senior 'AA-'.

Mellon Funding Corporation

--Long-term Issuer Default Rating (IDR) 'AA-';

--Long-term senior 'AA-';

--Long-term subordinated debt 'A '.

Mellon Bank N.A.

--Long-term Issuer Default Rating (IDR) 'AA-';

--Long-term deposits 'AA';

--Long term senior debt 'AA-';

--Long-term subordinated debt 'A '.

Mellon Trust of New England, N.A.

Mellon United National Bank

Mellon First Business Bank N.A.

--Long-term Issuer Default Rating (IDR) 'AA-';

--Long-term deposits 'AA'.

Mellon Capital I

Mellon Capital II

Mellon Capital III

--Trust preferred securities 'A '.

Ratings Affirmed

Bank of New York Company, Inc.

--Short-term issuer 'F1 ';

--Short-term debt 'F1 ';

--Individual 'A/B'

--Support '5'.

The Bank of New York

--Short-term deposits 'F1 ';

--Short-term issuer 'F1 ';

--Individual 'A/B';

--Support '2'.

Bank of New York (Delaware)

Bank of New York Trust Company, N.A.

--Short-term deposits 'F1 ';

--Short-term issuer 'F1 ';

--Individual 'A/B';

--Support '2'.

Bank of New York Europe

--Short-term issuer 'F1 ';

--Support '1'.

Mellon Financial Corporation

--Short-term issuer 'F1 ';

--Individual 'A/B';

--Support '5'.

Mellon Funding Corporation

--Short-term issuer 'F1 ';

--Short-term debt 'F1 ';

--Individual 'A/B';

--Support '5'.

Mellon Bank N.A.

--Short-term issuer 'F1 ';

--Short-term deposits 'F1 ';

--Individual 'A/B';

--Support '3'.

Mellon Trust of New England, N.A.

Mellon United National Bank

Mellon First Business Bank N.A.

--Short-term issuer 'F1 ';

--Short-term deposits 'F1 ';

--Individual 'A/B';

--Support '3'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.