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The Bank of New York Mellon Corporation (BK) Down 0.2% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for The Bank of New York Mellon Corporation (BK - Free Report) . Shares have lost about 0.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is The Bank of New York Mellon Corporation due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
BNY Mellon’s fourth-quarter 2020 adjusted earnings per share of 96 cents were 5% lower than the prior-year quarter’s level. The Zacks Consensus Estimate for earnings was 93 cents.
Results for the reported quarter reflect growth in asset balances. Also, lower expenses supported results to some extent. However, a decline in revenues was an undermining factor.
Net income applicable to common shareholders (GAAP basis) was $702 million or 79 cents per share, down from $1.39 billion or $1.52 per share recorded in the prior-year quarter.
For 2020, adjusted earnings of $4.01 per share were marginally lower than the previous year’s reported figure. The Zacks Consensus Estimate for earnings was $3.96. Net income applicable to common shareholders (GAAP basis) was $3.42 billion or $3.83 per share, down from $4.27 billion or $4.51 per share recorded in 2019.
Revenues & Expenses Decline
Total quarterly revenues (GAAP basis), excluding income from consolidated investment management funds, declined 20.1% year over year to $3.80 billion. The figure lagged the Zacks Consensus Estimate of $3.85 billion.
For 2020, revenues (GAAP basis), excluding income from consolidated investment management funds, declined 4.2% year over year to $15.72 billion. The figure lagged the Zacks Consensus Estimate of $15.78 billion.
Quarterly net interest revenues on a fully taxable-equivalent basis (non-GAAP basis) were $683 million, down 16.4% year over year. The decline was due to lower interest rates on interest-earning assets and the impact of hedging activities, partially offset by benefits from low deposit and funding rates, and higher deposits and securities portfolio.
Non-GAAP net interest margin (FTE basis) contracted 37 basis points year over year to 0.72%.
Total fee and other revenues declined 20.9% year over year to $3.12 billion. The fall was due to a decline in total investment services fees, foreign exchange and other trading revenues, distribution and servicing fees, and investment and other income.
Total non-interest expenses were $2.93 billion, down 1.3% from the prior-year quarter. The decline was due to a fall in staff expenses, sub-custodian and clearing costs, distribution and servicing costs, bank assessment charges, business development costs, and costs related to the amortization of intangible assets.
Asset Position Strong
As of Dec 31, 2020, AUM were $2.20 trillion, up 15% year over year. The rise was mainly driven by higher market values, the favorable impact of a weaker U.S. dollar and net inflows.
Assets under custody and/or administration of $41.1 trillion grew 10.8% year over year, reflecting higher market values, net new business, higher client inflows and the favorable impact of a weaker U.S. dollar.
Credit Quality Deteriorates
As of Dec 31, 2020, non-performing assets were $89 million, unchanged year over year.
However, allowance for loan losses — as a percentage of total loans — was 0.63%, up 41 basis points from the prior-year quarter. Moreover, provision for credit losses was $15 million against a provision benefit of $8 million recorded in the year-ago quarter.
Capital Ratios Mixed
As of Dec 31, 2020, common equity Tier 1 ratio was 13.1% compared with 11.5% on Dec 31, 2019. Tier 1 Leverage ratio was 6.3%, down from 6.6% on Dec 31, 2019.
2021 Outlook
Management expects organic fee growth to be approximately 1.5% and accelerate thereafter in 2021 as benefits of sustained investments become more meaningful.
Overall, total revenues are expected to be adversely impacted by headwinds related to low interest rate environment and subsequent money market fee waivers, partially offset by organic fee income growth.
Expenses (excluding notable items) are anticipated to be stable year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -7.61% due to these changes.
VGM Scores
At this time, The Bank of New York Mellon Corporation has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, The Bank of New York Mellon Corporation has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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The Bank of New York Mellon Corporation (BK) Down 0.2% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for The Bank of New York Mellon Corporation (BK - Free Report) . Shares have lost about 0.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is The Bank of New York Mellon Corporation due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
BNY Mellon's Q4 Earnings, Revenues & Costs Decline Y/Y
BNY Mellon’s fourth-quarter 2020 adjusted earnings per share of 96 cents were 5% lower than the prior-year quarter’s level. The Zacks Consensus Estimate for earnings was 93 cents.
Results for the reported quarter reflect growth in asset balances. Also, lower expenses supported results to some extent. However, a decline in revenues was an undermining factor.
Net income applicable to common shareholders (GAAP basis) was $702 million or 79 cents per share, down from $1.39 billion or $1.52 per share recorded in the prior-year quarter.
For 2020, adjusted earnings of $4.01 per share were marginally lower than the previous year’s reported figure. The Zacks Consensus Estimate for earnings was $3.96. Net income applicable to common shareholders (GAAP basis) was $3.42 billion or $3.83 per share, down from $4.27 billion or $4.51 per share recorded in 2019.
Revenues & Expenses Decline
Total quarterly revenues (GAAP basis), excluding income from consolidated investment management funds, declined 20.1% year over year to $3.80 billion. The figure lagged the Zacks Consensus Estimate of $3.85 billion.
For 2020, revenues (GAAP basis), excluding income from consolidated investment management funds, declined 4.2% year over year to $15.72 billion. The figure lagged the Zacks Consensus Estimate of $15.78 billion.
Quarterly net interest revenues on a fully taxable-equivalent basis (non-GAAP basis) were $683 million, down 16.4% year over year. The decline was due to lower interest rates on interest-earning assets and the impact of hedging activities, partially offset by benefits from low deposit and funding rates, and higher deposits and securities portfolio.
Non-GAAP net interest margin (FTE basis) contracted 37 basis points year over year to 0.72%.
Total fee and other revenues declined 20.9% year over year to $3.12 billion. The fall was due to a decline in total investment services fees, foreign exchange and other trading revenues, distribution and servicing fees, and investment and other income.
Total non-interest expenses were $2.93 billion, down 1.3% from the prior-year quarter. The decline was due to a fall in staff expenses, sub-custodian and clearing costs, distribution and servicing costs, bank assessment charges, business development costs, and costs related to the amortization of intangible assets.
Asset Position Strong
As of Dec 31, 2020, AUM were $2.20 trillion, up 15% year over year. The rise was mainly driven by higher market values, the favorable impact of a weaker U.S. dollar and net inflows.
Assets under custody and/or administration of $41.1 trillion grew 10.8% year over year, reflecting higher market values, net new business, higher client inflows and the favorable impact of a weaker U.S. dollar.
Credit Quality Deteriorates
As of Dec 31, 2020, non-performing assets were $89 million, unchanged year over year.
However, allowance for loan losses — as a percentage of total loans — was 0.63%, up 41 basis points from the prior-year quarter. Moreover, provision for credit losses was $15 million against a provision benefit of $8 million recorded in the year-ago quarter.
Capital Ratios Mixed
As of Dec 31, 2020, common equity Tier 1 ratio was 13.1% compared with 11.5% on Dec 31, 2019. Tier 1 Leverage ratio was 6.3%, down from 6.6% on Dec 31, 2019.
2021 Outlook
Management expects organic fee growth to be approximately 1.5% and accelerate thereafter in 2021 as benefits of sustained investments become more meaningful.
Overall, total revenues are expected to be adversely impacted by headwinds related to low interest rate environment and subsequent money market fee waivers, partially offset by organic fee income growth.
Expenses (excluding notable items) are anticipated to be stable year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -7.61% due to these changes.
VGM Scores
At this time, The Bank of New York Mellon Corporation has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, The Bank of New York Mellon Corporation has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.