Barclays on U.S. Large-Cap Banks: BNY Mellon and State Street - FX Lawsuits Continue to Drive Headline Risk
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Rating Summary:
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Today's Overall Ratings:
Up: 7 | Down: 5 | New: 19
Rating Summary:
19 Buy, 9 Hold, 0 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 7 | Down: 5 | New: 19
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Barclays on U.S. Large-Cap Banks: BNY Mellon and State Street - FX Lawsuits Continue to Drive Headline Risk
Barclays analyst, Jason M. Goldberg, said, "In addition to the market and interest rate environments, we expect investors to key in on foreign exchange trading lawsuits presently facing Bank of NY Mellon (NYSE: BK) and State Street (NYSE: STT) on the upcoming 3Q11 earnings calls."
"In general, we believe that BK's and STT's client contracts are likely to provide the needed disclosures to demonstrate their roles as principals instead of agents in the indirect foreign exchange transactions in question. In our opinion, their roles as principals in these transactions should minimize much of their potential legal exposure. However, their internal policies and procedures around the indirect trading business, especially the alleged practice of creating falsified monthly custody reports (if proven accurate), could raise questions."
"Despite lingering headline risk, given their near trough valuation levels (BK at 7.7x and STT at 8.0x 2012 EPS vs. historical 10-yr. averages of 14x and 15x
respectively), we believe shares of both BK and STT reflect the risks embedded in these foreign exchange lawsuits. We look forward to hearing more about the
companies' views of their ultimate legal exposure on this issue during their 3Q11 conference calls, with STT scheduled to report on Tuesday, October 18 and BK on Wednesday, October 19."
Barclays analyst, Jason M. Goldberg, said, "In addition to the market and interest rate environments, we expect investors to key in on foreign exchange trading lawsuits presently facing Bank of NY Mellon (NYSE: BK) and State Street (NYSE: STT) on the upcoming 3Q11 earnings calls."
"In general, we believe that BK's and STT's client contracts are likely to provide the needed disclosures to demonstrate their roles as principals instead of agents in the indirect foreign exchange transactions in question. In our opinion, their roles as principals in these transactions should minimize much of their potential legal exposure. However, their internal policies and procedures around the indirect trading business, especially the alleged practice of creating falsified monthly custody reports (if proven accurate), could raise questions."
"Despite lingering headline risk, given their near trough valuation levels (BK at 7.7x and STT at 8.0x 2012 EPS vs. historical 10-yr. averages of 14x and 15x
respectively), we believe shares of both BK and STT reflect the risks embedded in these foreign exchange lawsuits. We look forward to hearing more about the
companies' views of their ultimate legal exposure on this issue during their 3Q11 conference calls, with STT scheduled to report on Tuesday, October 18 and BK on Wednesday, October 19."
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