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Goldman Sachs Reiterates Buy Rating on Bank of New York Mellon (BK)

October 11, 2024 8:56 AM EDT
Get Alerts BK Hot Sheet
Price: $75.00 -0.41%

Rating Summary:
    15 Buy, 9 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 16 | Down: 18 | New: 23
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Goldman Sachs analyst Alexander Blostein reiterated a Buy rating and $80.00 price target on Bank of New York Mellon (NYSE: BK)

The analyst comments "BK reported adjusted 3Q24 EPS of $1.52 (ex. one-offs including $40mn in severance, $2mn in litigation reserves and $17mn of FDIC special assessment charges) or 7% ahead of Consensus at $1.42/share and 3% ahead of GSe $1.47 estimate. Results were solid across the board, supported by stronger NII, modestly higher fee revenues, stronger investment & other revenues as well as well-managed expenses, driving a 33% pre-tax Income margin (up ~200bps y/y). PPNR of $1.57bn was up 14% y/y and 7% ahead of consensus (Visible Alpha) estimates. Specifically, NII of $1,048mn came in 4% above expectations mostly driven by elevated repo activity and overall better than expected deposit trends (slower than expected decline within NIB and modest q/q growth in IB deposits). Normalizing for Repo activity, we peg BK NII still running at a healthy run-rate of ~$1bn/quarter. Fee revenues grew 5% y/y, reflecting stronger client activity trends -- particularly within Clearance and Collateral Management ($354mn vs. Street's $332mn), Treasury Services ($200mn vs. Street's $194mn), Investment Management ($781mn vs. Street's $771mn), and FX trading ($175mn vs. Street's $167mn). Softer revenue trends within Asset Servicing, Issuer Services, and Pershing were a partial offset. Expenses of $3,075mn were flat y/y and were well-managed considering a top-line beat. Stronger investment and other revenues of $196mn (relative to Street's $158mn) also contributed to the EPS beat, largely on upside in "other trading revenues". Capital ratios were also strong with CET1 increasing 50bp q/q to 11.9%, while T1 Lev increased 20bps to 6.0% q/q. Buybacks were strong at $725mn but modestly below GSe at $750mn. Taking a step back, we believe 3Q results underscore BK's continued execution across operational efficiencies (33% margin for the second quarter in a row), stable NII (with normalization in deposit trends) and healthy capital returns. The firm's fee growth algo remains somewhat underappreciated by the market, which we think collectively sets up the stock well for durable EPS growth over the coming years and further upside to the stock."

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 $74.45 yesterday.



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