Last week, Bank of New York Mellon Corporation (BK) announced the sale of its 10-year senior unsecured notes with maturity date on September 23, 2021 and a maturity value of $1 billion. The company would begin the settlement from September 23, 2011.
BNY Mellon sold these unsecured notes, having a coupon rate of 3.55%, at an issue price of $99.993. The interest will be paid semi-annually, with the first payment due on March 23, 2012. On maturity, the notes would yield 3.558%, along with a spread of 148 basis points higher than Treasuries.
The notes have been rated “Aa2” by Moody’s Investor Service, a rating arm of Moody’s Corp. (MCO) and “AA-” by both Fitch and Standard & Poor's. BNY Mellon, Deutsche Bank AG (DB) and Morgan Stanley (MS) were the joint book-running managers for the sale.
Earnings Recap
BNY Mellon’s second-quarter 2011 earnings of 59 cents per share beat the Zacks Consensus Estimate by 3 cents and also compared favorably with 54 cents per share earned in the year-ago quarter.
Increased fee revenue, wiped out provision for credit losses and improved capital ratios, despite dividend increase and stock repurchases, were among the positives. However, higher non-interest expenses formed the downside. Besides, BNY Mellon also experienced sequential and year-over-year increases in assets under custody and administration during the reported quarter, reflecting acquisitions in the prior year, change in market values and net new business.
Estimate Revision Trend
Over the last 30 days, 5 out of the 17 analysts covering BNY Mellon have lowered their estimates for the third quarter, while 1 has moved north. Moreover, for fiscal 2011, 4 out of the 17 analysts have decreased their estimates, while 1 analyst moved in the opposite direction over the last 30 days. However, for fiscal 2012, over the last 30 days, 6 out of 19 analysts have lowered their estimates, but none has upped it.
Currently, the Zacks Consensus Estimate for the third quarter of 2011 is operating earnings of 54 cents per share, down 3.26% from the year-ago quarter.
Our Take
BNY Mellon is expected to utilize the proceeds from the sale of notes for general corporate purposes including the repayment of outstanding debt securities. This initiative is also expected to enhance the company’s liquidity position.
BNY Mellon currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.
BANK OF NY MELL (BK): Free Stock Analysis Report
DEUTSCHE BK AG (DB): Free Stock Analysis Report
MOODYS CORP (MCO): Free Stock Analysis Report
MORGAN STANLEY (MS): Free Stock Analysis Report
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