On Jun 26, we issued an updated research report on The Bank of New York Mellon Corporation BK. Shares of this N.Y.-based major regional bank have recorded a year-to-date return of 7.2%. We believe this growth story has been aided by the company’s continued focus on cost-cutting measures apart from several other positives including a healthy liquidity position, sturdy revenue growth and huge international growth potential, which continue to assure a strong investment performance going forward.
BNY Mellon’s cost-saving initiatives (launched in 2011) have started yielding results, as witnessed in 2014 as well as in the first quarter of 2015. Despite the adverse impact of regulatory as well as investment-related expenses, the company managed to reduce overall costs. Notably, in spite of successfully attaining the targeted level of cost-savings for 2014 much before the stipulated time, the company continues to shed expensive real estate and consolidating facilities in an attempt to further control expenses.
BNY Mellon has considerable organic growth prospects and is poised to benefit from expansion in the global capital markets. Revenues have grown at a CAGR of 1.6% over the last 5 years (2010–2014), with the uptrend continuing in first-quarter 2015 as well. Additionally, management expects revenues to gather momentum in the upcoming quarters on the back of a strong investment performance and a strengthening Investment Management segment.
Moreover, BNY Mellon has been actively growing via acquisitions. The bank has been restructuring its business and streamlining operations to improve its focus and efficiency and capitalize on available opportunities. This will aid in reviving revenue generation in the forthcoming quarters.
On the flip side, a persistently low interest rate environment, slow economic recovery and stringent regulatory requirements will likely keep the bank’s financials under stress.
Over the past 30 days, the Zacks Consensus Estimate has remained stable at $2.70 and $3.12 per share for 2015 and 2016, respectively. Hence, BNY Mellon currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some better-ranked finance stocks worth considering include KeyCorp. KEY, Commerce Bancshares, Inc. CBSH and MidWest One Financial Group, Inc. MOFG. All three stocks carry a Zacks Rank #2 (Buy).
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