BNY Mellon Stock Is Trading Close To Its Fair Value

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[Updated 01/10/2022] BNY Mellon Valuation Update

BNY Mellon Stock (NYSE:BK) gained 37% in 2021, and at its current price of $61 per share, it’s trading about 2% below its fair value of $63 — according to Trefis estimates. BNY Mellon Valuation, The bank reported better-than-expected results in the third quarter of 2021, and its stock price has risen 6% since then. The custody giant has posted steady growth in 2021. While total fee and other revenue saw modest growth in the first three quarters of the year, the impact was offset by lower net interest income. NIIs suffered due to interest rate constraints, partially offset by lower financing costs and higher outstanding loan balances. We expect fourth quarter results to be on the same lines. Specifically, consensus estimates for fourth quarter revenue and earnings are $3.96 billion and $1.00, respectively.

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The bank’s top-line declined 4% year-on-year in 2020, as both NII and fee income were lower. While the cumulative nine-month total fees and other income has recovered somewhat (up 3% yoy) in 2021, NII is still down 15% from 2020 levels. That said, BK’s assets under management (AUM) rose 4% between December 2020 and September 2021 to $2.3 billion. In addition, assets under custody and administration (AUC/A) increased 10% to $45.3 trillion in the same period. we expect BNY Mellon’s Revenue To touch $15.9 billion for the full year of FY21. Additionally, adjusted net income margin is expected to remain around the same level as in 2020, leading to net income of approximately $3.4 billion in 2021. This would result in an EPS of approximately $4.12 when combined with the P/E multiple. Just above 15x, would lead to a valuation of $63.

Below you’ll find our previous coverage of BNY Mellon stock where you can track our outlook over time.

[Updated 11/16/2021] BNY Mellon stock has limited growth potential

BNY Mellon Stock (NYSE:BK) has gained a 41% YTD, and at its current price of $60 per share, it is trading about 5% below its fair value of $63 — according to estimates by Trefis. BNY Mellon Valuation, As in the previous quarter, the custody banking giant has topped Street’s expectations in its recently released third quarter results. It posted a 5% increase in total revenue to $4 billion, primarily due to a similar increase in total fee income, partially offset by a 9% decline in net interest income. Fee income benefited from higher investment services fees, foreign exchange revenue, and investment management and performance fees. Further, lower funding costs and higher outstanding loan balances supported the NII, however, the impact was more than offset by interest rate headwinds. The company’s assets under management (AUM) touched $2.3 billion in the quarter – up 4% compared to the end of December, followed by a 10% increase in assets under custody and administration (AUC/A) in the same period. with $45.3 trillion. That said, the marginal increase in adjusted net income was due to higher expenses as a % of revenue.

The bank reported a 4% decline in the top-line in 2020, mainly due to a 7% decline in NII and a 4% decline in total fees and other income. While NII was down due to low interest rate environment, fee income suffered due to lower investments and other income. Furthermore, NII followed the same trend in the first three quarters of 2021 – the cumulative nine-month NII fell 15% year-on-year to $1.9 billion. However, due to increases in investment services fees and investment management and performance fees, total fees and other income increased 3% annually to $9.98 billion over the same period. That said, interest rates are unlikely to recover immediately to pre-Covid-19 levels and will continue to hurt NIIs. However, growth in the Investment Management Division will offset the negative impact and enable BNY Mellon’s Revenue To touch $15.9 billion in FY2021. Additionally, adjusted net income margin is expected to remain stable over the year, leading to net income of approximately $3.4 billion. In addition, the bank has restarted the share repurchase program and increased the quarterly dividend. This would result in EPS of approximately $4.12 for fiscal 2021, combined with a P/E multiplier of above 15x, valuing $63.

[Updated 08/27/2021] Is BNY Mellon stock undervalued?

BNY Mellon Stock (NYSE:BK) has gained a 31% YTD, and at its current price of $55 per share, it is trading slightly less than its fair value of $57 — according to estimates from Trefis. BNY Mellon Valuation, The bank recently released its second quarter 2021 results, beating consensus estimates of revenue and earnings. It reported total revenue of $3.96 billion — marginally less than the year-ago period. While total fees and other income increased 2% in the quarter, this was more than offset by a 17% decline in net interest income due to interest rate headwinds. However, the firm still managed to post adjusted net income of $990 million – 10% year-over-year, primarily due to a favorable reduction in credit deficit provisions, higher non-interest expenses as a % of revenue. partially offset from.

The company reported $15.8 billion in revenue for 2020 — down 4%. This was due to a 7% decline in net interest income and a 4% decline in total fees and other income. Moreover, the same trend continued in the first quarter of 2021 as well. However, second-quarter results were slightly different, as total fees and other income posted positive growth. This was primarily driven by growth in assets – assets under management (AUM) increased 18% annually to $2.3 trillion and assets under custody and administration (AUC/A) increased 21% annually to $45 trillion. That said, we expect NIIs to continue to suffer in subsequent quarters, as interest rates are unlikely to recover to pre-Covid-19 levels anytime soon. However, the negative impact is likely to be offset by an increase in fee income. in totality, BNY Mellon’s Revenue It is expected to be around $15.9 billion in FY21. Additionally, the company has increased its quarterly cash dividend by 10% from $0.31 to $0.34 per share (effective from Q3) in addition to a $6 billion share repurchase plan valid until December 2022. This could lead to an increase in shareholder payouts, resulting in an EPS of $4.09 for FY2021. This combined with a P/E multiplier of just below 14x would lead to a valuation of $57.

[Updated 04/30/2021] BNY Mellon Stock Has a Limited Upside

BNY Mellon Stock (NYSE:BK) is up 92% and YTD 24% from last year’s March 23 low. In addition, at its current price of $50 per share, it is 5% below its fair value of $53 — according to Trefis’ estimates. BNY Mellon Valuation, The custody banking giant beat consensus estimates for revenue and earnings in its recently released first quarter FY21 results. However, both the figures declined on a year-on-year basis. The bank reported revenue of $3.9 billion (down 5%), primarily driven by a 20% decline in net interest income due to a lower interest rate environment. Similarly, its EPS declined from $1.05 to $0.97 in the quarter. The decline in EPS was partly due to lower revenue and partly driven by higher non-interest expenses as a percentage of revenue.

The bank is heavily dependent on asset servicing fees (29% in 2020) and investment management fees (22% in 2020) as a percentage of assets under custody and administration (AUC/A) and assets under management (AUM). is taken in. respectively. In Q1, AuC/A grew 1.5% sequentially to $41.7 trillion, while AuM grew marginally to $2.2 trillion. Growth in the asset base is a positive indicator for the company, which is likely to benefit its revenue prospects. However, both the investment management fee as a % of AUM and the asset servicing fee as % AuC/A have registered a decline in 2020 and are expected to see a further reduction in FY21. This is likely to dampen the positive impact of asset growth to some extent. In addition, net interest income benefited from an increase in interest-earning assets, although this was more than offset by a decline in net interest margin. We expect the same trend to continue in the current year as well. Overall, the above factors will likely limit BNY Mellon’s Revenue $15.7 billion in fiscal 2021 – slightly less than the 2020 figure. That said, net income margin is likely to see some improvement due to lower non-interest expense and favorable reduction in loan deficit provisions, leading to EPS of $4.11 for FY21. This, combined with a P/E multiplier of just below 13x, would lead to a valuation of $53.

[Updated 03/03/2021] BNY Mellon Stock Still Undervalued

BNY Mellon Stock (NYSE:BK) is up 59% from last year’s March 23 low and at its current price of $44 per share, that’s 10% below its fair value of $48 — according to Trefis’ estimates. BNY Mellon Valuation, The mortgage banking giant exceeded consensus estimates for revenue and earnings in its recently released fourth-quarter results. It reported an EPS figure of $0.96 and total revenue of $3.8 billion. Its revenue was down 20% compared to the year-ago period, primarily driven by a 17% decline in net interest income and a 22% reduction in total fees due to money market fee exemptions.

The bank reported $15.8 billion in revenue for the full year 2020 — about 4% less than the 2019 figure. This was primarily driven by a 7% decline in net interest income and a 4% decline due to a lower interest rate environment.

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