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The Bank of New York Mellon Corporation (BK) Up 7.9% Since Last Earnings Report: Can It Continue?
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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 added about 7.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is The Bank of New York Mellon Corporation due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
BNY Mellon’s third-quarter 2023 adjusted earnings of $1.27 per share surpassed the Zacks Consensus Estimate of $1.14. The bottom line reflects a rise of 5% from the prior-year quarter.
Results have been primarily aided by a rise in net interest revenues, marginally higher fee revenues and lower expenses. AUM balance witnessed a rise, which was another major positive for the company. However, the credit quality was relatively weak in the quarter.
Net income applicable to common shareholders (GAAP basis) was $956 million or $1.22 per share, up from the $319 million or 39 cents per share recorded in the year-ago quarter. Our estimate for net income was $836.6 million.
Revenues Improve, Expenses Decline
Total revenues increased 2% year over year to $4.37 billion. The top line surpassed the Zacks Consensus Estimate of $4.30 billion.
Net interest revenues, on a fully taxable-equivalent (FTE) basis, were $1.02 billion, up 9% year over year. The rise reflected higher interest rates, partially offset by changes in balance sheet size and mix.
The net interest margin (FTE basis) expanded 13 basis points (bps) year over year to 1.18%. Our estimate for NIM was 1.15%.
Total fee and other revenues increased marginally year over year to $3.36 billion. The rise was driven by an increase in investment services fees, financing-related fees, and distribution and servicing fees. Our estimate for the same was $3.32 billion.
Total non-interest expenses (GAAP basis) were $3.09 billion, declining 16% year over year. Almost all cost components increased, except for sub-custodian and clearing charges, distribution and servicing costs, and costs related to the amortization of intangible assets. Also, in the reported quarter, the company did not record any expense related to goodwill impairment. Our estimate for expenses was $3.15 billion.
Asset Balances Improve
As of Sep 30, 2023, AUM was $1.82 trillion, up 3% year over year. The rise reflected the favorable impacts of a weaker U.S. dollar and higher market values, partially offset by the divestiture of Alcentra. Our estimate for AUM was $1.90 trillion.
Assets under custody and/or administration of $45.7 trillion increased 8% year over year, primarily reflecting higher market values, client inflows, the favorable impact of a weaker U.S. dollar and net new business.
Credit Quality: A Mixed Bag
The allowance for loan losses, as a percentage of total loans, was 0.32%, up 9 bps from the prior-year quarter. In the reported quarter, the company recorded a provision for credit losses of $3 million against a provision benefit of $30 million in the year-ago quarter. We had projected provisions of $3.7 million.
However, as of Sep 30, 2023, non-performing assets were $48 million, down 55% year over year.
Capital Position Improves
As of Sep 30, 2023, the common equity Tier 1 ratio was 11.4%, up from 10% as of the Sep 30, 2022 level. Tier 1 leverage ratio was 6.1%, up from 5.4% as of Sep 30, 2022.
Share Repurchase Update
During the reported quarter, BNY Mellon repurchased shares worth $450 million.
2023 Outlook
Based on the market-implied forward interest rates, NIR is expected to be up 20% year over year.
Excluding notable items, expenses are expected to increase almost 4% (roughly half of the growth experienced in 2022).
Average deposits are expected to decline in the mid to high single-digit range in the second half of 2023.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, The Bank of New York Mellon Corporation has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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.
Performance of an Industry Player
The Bank of New York Mellon Corporation belongs to the Zacks Banks - Major Regional industry. Another stock from the same industry, The PNC Financial Services Group, Inc (PNC - Free Report) , has gained 11.5% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
The PNC Financial Services Group, Inc reported revenues of $5.23 billion in the last reported quarter, representing a year-over-year change of -5.7%. EPS of $3.60 for the same period compares with $3.78 a year ago.
For the current quarter, The PNC Financial Services Group, Inc is expected to post earnings of $3 per share, indicating a change of -14% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.6% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for The PNC Financial Services Group, Inc. Also, the stock has a VGM Score of D.
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The Bank of New York Mellon Corporation (BK) Up 7.9% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for The Bank of New York Mellon Corporation (BK - Free Report) . Shares have added about 7.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is The Bank of New York Mellon Corporation due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
BNY Mellon Q3 Earnings Beat, Revenues & AUM Increase Y/Y
BNY Mellon’s third-quarter 2023 adjusted earnings of $1.27 per share surpassed the Zacks Consensus Estimate of $1.14. The bottom line reflects a rise of 5% from the prior-year quarter.
Results have been primarily aided by a rise in net interest revenues, marginally higher fee revenues and lower expenses. AUM balance witnessed a rise, which was another major positive for the company. However, the credit quality was relatively weak in the quarter.
Net income applicable to common shareholders (GAAP basis) was $956 million or $1.22 per share, up from the $319 million or 39 cents per share recorded in the year-ago quarter. Our estimate for net income was $836.6 million.
Revenues Improve, Expenses Decline
Total revenues increased 2% year over year to $4.37 billion. The top line surpassed the Zacks Consensus Estimate of $4.30 billion.
Net interest revenues, on a fully taxable-equivalent (FTE) basis, were $1.02 billion, up 9% year over year. The rise reflected higher interest rates, partially offset by changes in balance sheet size and mix.
The net interest margin (FTE basis) expanded 13 basis points (bps) year over year to 1.18%. Our estimate for NIM was 1.15%.
Total fee and other revenues increased marginally year over year to $3.36 billion. The rise was driven by an increase in investment services fees, financing-related fees, and distribution and servicing fees. Our estimate for the same was $3.32 billion.
Total non-interest expenses (GAAP basis) were $3.09 billion, declining 16% year over year. Almost all cost components increased, except for sub-custodian and clearing charges, distribution and servicing costs, and costs related to the amortization of intangible assets. Also, in the reported quarter, the company did not record any expense related to goodwill impairment. Our estimate for expenses was $3.15 billion.
Asset Balances Improve
As of Sep 30, 2023, AUM was $1.82 trillion, up 3% year over year. The rise reflected the favorable impacts of a weaker U.S. dollar and higher market values, partially offset by the divestiture of Alcentra. Our estimate for AUM was $1.90 trillion.
Assets under custody and/or administration of $45.7 trillion increased 8% year over year, primarily reflecting higher market values, client inflows, the favorable impact of a weaker U.S. dollar and net new business.
Credit Quality: A Mixed Bag
The allowance for loan losses, as a percentage of total loans, was 0.32%, up 9 bps from the prior-year quarter. In the reported quarter, the company recorded a provision for credit losses of $3 million against a provision benefit of $30 million in the year-ago quarter. We had projected provisions of $3.7 million.
However, as of Sep 30, 2023, non-performing assets were $48 million, down 55% year over year.
Capital Position Improves
As of Sep 30, 2023, the common equity Tier 1 ratio was 11.4%, up from 10% as of the Sep 30, 2022 level. Tier 1 leverage ratio was 6.1%, up from 5.4% as of Sep 30, 2022.
Share Repurchase Update
During the reported quarter, BNY Mellon repurchased shares worth $450 million.
2023 Outlook
Based on the market-implied forward interest rates, NIR is expected to be up 20% year over year.
Excluding notable items, expenses are expected to increase almost 4% (roughly half of the growth experienced in 2022).
Average deposits are expected to decline in the mid to high single-digit range in the second half of 2023.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, The Bank of New York Mellon Corporation has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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.
Performance of an Industry Player
The Bank of New York Mellon Corporation belongs to the Zacks Banks - Major Regional industry. Another stock from the same industry, The PNC Financial Services Group, Inc (PNC - Free Report) , has gained 11.5% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
The PNC Financial Services Group, Inc reported revenues of $5.23 billion in the last reported quarter, representing a year-over-year change of -5.7%. EPS of $3.60 for the same period compares with $3.78 a year ago.
For the current quarter, The PNC Financial Services Group, Inc is expected to post earnings of $3 per share, indicating a change of -14% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.6% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for The PNC Financial Services Group, Inc. Also, the stock has a VGM Score of D.