Deutsche Bank Starts Bank of New York Mellon (BK) at Hold

Deutsche Bank initiates coverage on Bank of New York Mellon (NYSE: BK) with a Hold rating and a price target of $34.00.

Analyst Brian Bedell said, "While we regard BK’s industry-leading positions in several businesses as positioning the firm well to benefit from longer-term global growth in managed products (both from servicing & asset mgmt perspective), we see the current tough revenue backdrop lasting through at least 2014 & possibly into 2015, restraining revenue growth to a low-single digit growth pace in 2014-15. We think this will limit significant appreciation in the shares for at least the next 6-12 months. Key reasons for our view are: 1) a subdued short-term rate backdrop that could worsen if ECB eases in June, keeping fee waivers elevated & NIM depressed, 2) sluggish equity & fixed income trading volumes, as well as FX volatility, 3) continued runoff of corp. trust ABS book for 18-24 months, & 4) slow growth in asset servicing on $27tr AuA base."

"Longer-term, while BK is heavily-levered to normalized rate backdrop, several offsets may mitigate the benefit, including greater growth initiative spending, higher comp, elevated regulatory costs, & smaller balance sheet. Positively, asset mgmt organic growth via multi-boutique model is promising, as are growth initiatives in collateral mgmt, alternatives servicing, & clearing. We also think expense mgmt is good considering the tough backdrop though further revenue weakness creates difficult long-term spending decisions. Overall, aside from any accretive sale scenario of corp. trust business, we do not see any major catalyst this year to advance the shares sustainably," he 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 $34.33 yesterday.

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