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Why Is BNY Mellon (BK) Down 3.9% Since the Last Earnings Report?
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A month has gone by since the last earnings report for The Bank Of New York Mellon Corporation (BK - Free Report) . Shares have lost about 3.9% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? 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 catalysts.
BNY Mellon Beats on Q2 Earnings as Revenues Improve
BNY Mellon’s second-quarter 2017 earnings per share of 88 cents surpassed the Zacks Consensus Estimate of 84 cents. The figure also came 17% higher than the prior-year quarter tally.
Better-than-expected results were driven by higher revenues and benefit from provisions. Also, assets under management reflected growth. However, a slight rise in expenses acted as a headwind.
Net income applicable to common shareholders came in at $926 million, up 12% year over year.
Revenues Improve, Costs Rise
Total revenue (non-GAAP) for the quarter increased 5% year over year to $3.95 billion, beating the Zacks Consensus Estimate of $3.85 billion.
Net interest revenue, on a fully taxable equivalent basis, was $838 million, up 7% year over year. The rise was driven by higher interest rates and lower premium amortization, partly offset by a fall in average interest-earning assets and higher average long-term debt.
Additionally, net interest margin grew 18 basis points to 1.16%.
Total fee and other revenues increased 4% from the prior-year quarter to $3.12 billion. The rise was primarily driven by higher total investment services fees, and investment management and performance fees.
Total non-interest expenses (non-GAAP) amounted to $2.59 billion, up 1% year over year. This reflects a rise in expenses in nearly all categories, except net occupancy costs, business development expenses, sub-custodian costs and amortization of intangible assets.
Strong Asset Position
As of Jun 30, 2017, AUM was $1.77 trillion, up 6% year over year. This reflected higher market values and net inflows, partly offset by the unfavorable impact of a stronger U.S. dollar (principally versus the British pound).
Moreover, assets under custody and administration of $31.1 trillion were up 5% year over year. Higher market values largely drove the rise.
Credit Quality: A Mixed Bag
Non-performing assets declined 6.5% year over year to $100 million. Further, provision for credit losses was a benefit of $7 million compared with a benefit of $9 million in the year-ago quarter.
However, allowance for loan losses increased 4% year over year to $164 million.
Capital Ratios Improve
As of Jun 30, 2017, common equity Tier-1 ratio (Standardized Basel 3 fully phased-in) came in at 11.4% compared with 11.3% as of Dec 31, 2016. Leverage capital ratio was 6.7%, up from 6.6% in the prior-quarter level.
Share Repurchase
During the reported quarter, BNY Mellon bought back 11 million shares for $506 million.
Outlook
Management is of the opinion that a rising rate scenario will positively impact margins. As a result, higher NIM will more than offset the reduced size of the balance sheet. Also, this will lead to a modest rise in NIR.
NIR is expected to be in the high end of the 4%–6% range in 2017.
As a result, it expects to generate positive operating leverage in 2017.
On an average, the company expects investment in other income to tend towards the high end of the $60-$80 million range each quarter in 2017.
Looking at expenses, management continues to expect legal and professional expenses to decline by nearly $10 million per quarter during the second half of 2017.
Further, in 2017, total adjusted expenses will not be up more than 1%.
Moreover, the effective tax rate is anticipated to be around 25–26% for 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.
Bank Of New York Mellon Corporation (The) Price and Consensus
At this time, BNY Mellon's stock has a poor Growth Score of F, however its Momentum is doing a bit better with a D. Following the exact same course, the stock was allocated also a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Why Is BNY Mellon (BK) Down 3.9% Since the Last Earnings Report?
A month has gone by since the last earnings report for The Bank Of New York Mellon Corporation (BK - Free Report) . Shares have lost about 3.9% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? 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 catalysts.
BNY Mellon Beats on Q2 Earnings as Revenues Improve
BNY Mellon’s second-quarter 2017 earnings per share of 88 cents surpassed the Zacks Consensus Estimate of 84 cents. The figure also came 17% higher than the prior-year quarter tally.
Better-than-expected results were driven by higher revenues and benefit from provisions. Also, assets under management reflected growth. However, a slight rise in expenses acted as a headwind.
Net income applicable to common shareholders came in at $926 million, up 12% year over year.
Revenues Improve, Costs Rise
Total revenue (non-GAAP) for the quarter increased 5% year over year to $3.95 billion, beating the Zacks Consensus Estimate of $3.85 billion.
Net interest revenue, on a fully taxable equivalent basis, was $838 million, up 7% year over year. The rise was driven by higher interest rates and lower premium amortization, partly offset by a fall in average interest-earning assets and higher average long-term debt.
Additionally, net interest margin grew 18 basis points to 1.16%.
Total fee and other revenues increased 4% from the prior-year quarter to $3.12 billion. The rise was primarily driven by higher total investment services fees, and investment management and performance fees.
Total non-interest expenses (non-GAAP) amounted to $2.59 billion, up 1% year over year. This reflects a rise in expenses in nearly all categories, except net occupancy costs, business development expenses, sub-custodian costs and amortization of intangible assets.
Strong Asset Position
As of Jun 30, 2017, AUM was $1.77 trillion, up 6% year over year. This reflected higher market values and net inflows, partly offset by the unfavorable impact of a stronger U.S. dollar (principally versus the British pound).
Moreover, assets under custody and administration of $31.1 trillion were up 5% year over year. Higher market values largely drove the rise.
Credit Quality: A Mixed Bag
Non-performing assets declined 6.5% year over year to $100 million. Further, provision for credit losses was a benefit of $7 million compared with a benefit of $9 million in the year-ago quarter.
However, allowance for loan losses increased 4% year over year to $164 million.
Capital Ratios Improve
As of Jun 30, 2017, common equity Tier-1 ratio (Standardized Basel 3 fully phased-in) came in at 11.4% compared with 11.3% as of Dec 31, 2016. Leverage capital ratio was 6.7%, up from 6.6% in the prior-quarter level.
Share Repurchase
During the reported quarter, BNY Mellon bought back 11 million shares for $506 million.
Outlook
Management is of the opinion that a rising rate scenario will positively impact margins. As a result, higher NIM will more than offset the reduced size of the balance sheet. Also, this will lead to a modest rise in NIR.
NIR is expected to be in the high end of the 4%–6% range in 2017.
As a result, it expects to generate positive operating leverage in 2017.
On an average, the company expects investment in other income to tend towards the high end of the $60-$80 million range each quarter in 2017.
Looking at expenses, management continues to expect legal and professional expenses to decline by nearly $10 million per quarter during the second half of 2017.
Further, in 2017, total adjusted expenses will not be up more than 1%.
Moreover, the effective tax rate is anticipated to be around 25–26% for 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.
Bank Of New York Mellon Corporation (The) Price and Consensus
Bank Of New York Mellon Corporation (The) Price and Consensus | Bank Of New York Mellon Corporation (The) Quote
VGM Scores
At this time, BNY Mellon's stock has a poor Growth Score of F, however its Momentum is doing a bit better with a D. Following the exact same course, the stock was allocated also a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.