DBRS Confirms Mellon Financial Corporation - Senior Debt at A (high)

Dominion Bond Rating Service (“DBRS”) has confirmed the ratings for Mellon Financial Corporation (“Mellon” or the “Company”) and Mellon Bank, N.A., as listed above, following the annual review of the Company’s operations and financial fundamentals. The trend for all ratings is Stable.

During 2005, Mellon experienced strong revenue and bottom line growth, primarily as a result of higher fees derived from investment management and institutional custody services. Both of these business lines benefited from increased volumes and rising stock prices during the year. Net interest income, which accounts for only about 10% of net revenues, declined modestly because of a small loan loss provision as opposed to net recoveries in the prior year. The Company remains sufficiently capitalized, and its asset quality and liquidity positions remain strong.

Mellon’s ratings reflect strong global market positions in its asset management and asset servicing businesses that have sustained strong and stable core earnings and above peer-group average profitability over the past five years. Ample liquidity, good asset quality, and a low risk profile also support its ratings.

The loan portfolio consists of mostly high-quality relationships that typically use several fee-based products in addition to loans. Some of these relationships, however, are bulky, resulting in Mellon’s loan portfolio being less granular than that of many of its peers. However, the incremental revenues from low-risk ancillary businesses used by these relationships render the risks on large exposures attractively rewarded.

The Stable trends reflect DBRS’s expectation that the Company, through its core business units, will be able to sustain strong operating performance and sound financial fundamentals in the intermediate future.

Mellon’s above-average profitability is largely a result of the Company’s ability to capitalize on its scale-driven businesses and successfully selling multiple products and services to its customers. In 2005, Mellon reported return on assets of 2.08%, risk-adjusted return of 5.04%, and return on equity of 21.9%. All of these profitability indicators were above the respective medians for those of its peers, including The Bank of New York Company, Inc. and State Street Corporation – peers that have the most similar business profiles to Mellon’s.

Mellon maintains a sufficient capital base, which is vital given the Company’s exposure to a high level of operating risk in its extensive global financial services. The tangible common equity/tangible assets ratio, however, trails those of its peers because of the high level of acquisition-related goodwill. DBRS considers this ratio (5.2% at year-end 2005) adequate in view of Mellon’s strong earnings capacity, low risk profile, and good asset quality.

The holding company’s financial profile is satisfactory. Double-leverage of 113% at December 31, 2005, was in line with those of peers. Stand-alone liquidity is sufficient to meet operating and debt service obligations (including typical dividend payments) for at least ten months without depending on dividends from the regulated bank subsidiary.