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Is a Beat in the Offing for BNY Mellon (BK) in Q2 Earnings?

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The Bank of New York Mellon Corporation (BK - Free Report) is scheduled to report second-quarter 2021 results on Jul 15, before market open. While its revenues in the to-be-reported quarter are expected to have witnessed a decline on a year-over-year basis, earnings are anticipated to have been unchanged.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate. Results benefited from growth in assets under management (AUM) balance. However, lower revenues and higher expenses were the undermining factors.

BNY Mellon has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with a surprise of 6.1%, on average.

The Zacks Consensus Estimate for the company’s second-quarter earnings is pegged at $1.01, which has increased 2% over the past 30 days. However, the estimate indicates no change from the year-ago quarter’s reported number.

The consensus estimate for sales is pegged at $3.91 billion, indicating a 1.1% decline from the prior-year quarter’s reported figure.

Now, before we take a look at what our quantitative model predicts, let’s check the factors that are likely to have impacted BNY Mellon’s second-quarter performance.

Fee Revenues: Supported by decent asset inflows in the second quarter, BNY Mellon is expected to have recorded an improvement in total AUM balance. Thus, the related fee is likely to have increased in the to-be-reported quarter.

Notably, the Zacks Consensus Estimate for total investment services fee (comprising more than 50% of the company’s total revenues) is pegged at $2.05 billion, which indicates a marginal decline from the previous quarter’s reported number.

The consensus mark for financing-related fees is pegged at $51 million, which suggests no change sequentially. The consensus estimate for foreign exchange and other trading revenues is pegged at $189 million, suggesting a decline of 18.2% sequentially.

Thus, the consensus estimate for total fee revenues is pegged at $3.23 billion, suggesting a 1% decline sequentially.

Net Interest Revenues: Similar to the past quarters, the overall lending scenario remained weak in the second quarter despite the resumption of business activities. Thus, while slight steepening of the yield curve is likely to have offered some support to BNY Mellon’s interest income, its NIR is expected to have been hurt because of muted loan growth and the near-zero interest rate environment.

The company expects second-quarter 2021 fee waivers (net of distribution and servicing expenses) of $220 million. This will likely have a modest negative impact on revenues of $20 million due to lower rates, partially offset by higher balances.

Expenses: Because of higher litigation and restructuring charges, BNY Mellon’s expenses have been elevated over the past few years. Nevertheless, overall costs are expected to have been manageable in the quarter under review, given the elimination of unnecessary management layers.

What the Zacks Model Unveils

According to our quantitative model, the chances of BNY Mellon beating the Zacks Consensus Estimate this time are high. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better — which is required to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for BNY Mellon is +1.84%.

Zacks Rank: The company currently carries a Zacks Rank #2 (Buy).

Other Stocks That Warrant a Look

Here are some other finance stocks that you may want to consider as these too have the right combination of elements to post an earnings beat in their upcoming releases, per our model.

The Earnings ESP for Bank of America Corporation (BAC - Free Report) is +0.65% and it carries a Zacks Rank of 3 at present. The company is scheduled to report quarterly numbers on Jul 14.

PNC Financial (PNC - Free Report) is slated to report quarterly results on Jul 14. The company currently has an Earnings ESP of +6.14% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BankUnited, Inc. (BKU - Free Report) is scheduled to release earnings numbers on Jul 22. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +1.04%.

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