Goldman Sachs Upgrades Bank of New York Mellon (BK) and Adds Stock to Conviction Buy List

Goldman Sachs upgraded Bank of New York Mellon (NYSE: BK) from Neutral to Conviction Buy with a price target of $48. Analyst Alexander Blostein views trust banks as a defensive growth play ,and he sees 27% upside in Bank of New York Mellon.

"We believe BK’s leverage to higher rates, cost discipline and less beta exposure will drive better-than-expected EPS growth at a time when other areas of Capital Markets are facing more challenging top-line backdrop. With the stock underperforming the XLF by over 500 bps since early December, shares now trade at 12X NTM P/E, 10% below its historical multiple and +20% discount vs. S&P (vs. historical 10%). We view BK as having a more certain EPS growth profile in Financials (run-rate EPS with +100 bp Fed Funds rates is ~$3.50, up ~25% from 2015E EPS), a result of lower deposit beta and less exposure to the credit cycle vs. other banks," said Blostein.

"We raise our 2015-17 EPS to reflect the recent move in market rates and expectations of more volatility, now 3%/8% vs. consensus for 2016/17. We also introduce our 2018 EPS estimate of $4.50," the analyst added.

For an analyst ratings summary and ratings history on Bank of New York Mellon click here. For more ratings news on Bank of New York Mellon click here.

Shares of Bank of New York Mellon closed at $37.15 yesterday.

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