Back to top

Analyst Blog

Zacks Equity Research

BNY Mellon's (BK) Q1 Earnings & Revenues Meet Expectations

STI FITB BK STT

Trades from $3

The Bank of New York Mellon Corporation’s (BK - Free Report) first-quarter 2017 adjusted earnings per share were 80 cents, in line with the Zacks Consensus Estimate.

A rise in revenues and provision benefit supported the results. Also, assets under management (AUM) reflected growth. However, a marginal increase in expenses and lower foreign exchange and other trading revenues were among the headwinds.

After considering 3 cents per share of tax benefit related to new accounting guidance for stock awards, net income applicable to common shareholders for the quarter came in at $880 million or 83 cents per share, up from $804 million or 73 cents per share in the prior-year quarter.

 

 



Revenues Improve, Costs Rise

Total revenue (non-GAAP) for the quarter increased 2% year over year to $3.83 billion. Further, the figure was on par with the Zacks Consensus Estimate.

Net interest revenue, on a fully taxable equivalent basis, was $804 million, up 3% year over year. The rise was driven by higher interest rates and the impact of interest rate hedging activities, partly offset by a fall in average interest-earning assets and higher average long-term debt.

Additionally, net interest margin grew 13 basis points to 1.14%.

Total fee and other revenues increased 2% from the prior-year quarter to $3.02 billion. A rise in all components except foreign exchange and other trading revenues, and investment and other income was the primary reason for the growth.

Total non-interest expenses (non-GAAP) amounted to $2.58 billion, up 1% year over year. This reflects a rise in expenses in nearly all categories, except net occupancy costs, business development expenses, other costs and amortization of intangible assets.

Strong Asset Position

As of Mar 31, 2017, AUM was $1.73 trillion, up 5% year over year. This reflected higher market values, partly offset by the unfavorable impact of a stronger U.S. dollar (principally versus the British pound).

Moreover, assets under custody and administration of $30.6 trillion were up 5% year over year. Higher market values were partially offset by unfavorable impact of a stronger U.S. dollar.

Improvement in Credit Quality

Non-performing assets declined 63.4% year over year to $107 million. Further, provision for credit losses was a benefit of $5 million compared with provision of $10 million in the year-ago quarter.

However, allowance for loan losses increased 1% year over year to $164 million.

Capital Ratios Improve

As of Mar 31, 2017, common equity tier-1 ratio (Standardized Basel 3 fully phased-in) came in at 11.5% compared with 11.3% as of Dec 31, 2016. Leverage capital ratio was 6.6%, on par with the prior-quarter level.

Share Repurchase

During the reported quarter, BNY Mellon bought back 19 million shares for $879 million.

Our Viewpoint

BNY Mellon’s restructuring initiatives and inorganic growth strategy will go a long way in supporting its bottom line. Further, its efficient expense management, strong global reach and gradually easing margin pressure are expected to support profitability in the long run.

However, concentration risks arising from significant dependence on fee-based income along with regulatory restrictions remain matters of concern for the company in the near term.

Currently, BNY Mellon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other regional banks, SunTrust Banks, Inc. (STI - Free Report) is slated to announce first-quarter 2017 results on Apr 21. Fifth Third Bancorp (FITB - Free Report) is scheduled to announce its results on Apr 25 while State Street Corp. (STT - Free Report) will report on Apr 26.

Zacks' 2017 IPO Watch List

Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.

One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>