What To Expect From BNY Mellon Stock In Q4?

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BNY Mellon (NYSE:BK) It is scheduled to report its fiscal Q4 2021 results on Tuesday, January 18, 2022. We expect BNY Mellon to remain slightly below consensus estimates for revenue and earnings. The custody banking giant posted better-than-expected results last quarter, with the top-line growing 5% annually. This was driven by increases in asset servicing, investment management and performance fees, forex and other trading revenues. The company saw steady growth in assets under management (AUM) and assets under custody and administration (AUC/A) in the quarter. That said, the top-line was partially offset by a decline in net interest income due to interest rate headwinds. We expect the same trend to continue in the fourth quarter.

Our forecast shows that BNY Mellon Valuation $63 per share, which is about 2% less than the current market price of about $64. Our interactive dashboard analysis BNY Mellon earnings preview There is more detail.

(1) Revenue is expected to be well below consensus estimates

BNY Mellon’s Revenue declined 4% year-on-year in 2020 to $15.8 billion. This was primarily driven by a 7% decline in NII and a 4% decline in total fees and other income.

  • Total fees and other income contributes about 80% of total revenue. Of this, about 35% comes from asset servicing fees and 26% from investment management and performance fees. Specifically, the asset servicing fee and investment management and performance fee are charged as AUC/A and % of AUM, respectively. While AuC/A increased 10% to $45.3 trillion between December 2020 and September 2021, total AuM increased by 4% to $2.3 billion over the same period. Overall, the nine-month cumulative figure rose 3% annually to $9.98 billion. We expect the same momentum to continue in the fourth quarter.
  • The bank faced a 7% year-on-year decline in NII in 2020, mainly due to the low interest rate environment. This pattern continued into 2021, with cumulative nine-month revenue declining 15% year-over-year to $1.9 billion. We expect fourth quarter results to be on the same lines.
  • Overall, we expect BNY Mellon revenue for the full year of fiscal 2021 to be approximately $15.9 billion.

Trefis estimates BNY Mellon’s fiscal 2021 fourth quarter revenue to be about $3.96 billion, which is lower than the consensus estimate of $3.98 billion. We expect an increase in total fee and other income to drive fourth quarter results.

The Federal Reserve is expected to hike interest rates in 2022. This will benefit BNY Mellon’s net interest income. Further, the growth in AUM and AUC/A is likely to continue in the subsequent quarters. Our Dashboard is on BNY Mellon’s Revenue Provides more details on the company’s operating segment along with our forecast for FY2022.

2) Consensus estimates of EPS are likely to miss marginally

BNY Mellon Q4 2021 adjusted earnings per share is expected to be $0.98 per Trefis analysis, which is approximately 3% lower than the consensus estimate of $1.01. The bank reported a 20% decline in 2020 adjusted net income to $3.4 billion. This was due to lower revenue and higher expenses as a % of revenue. In addition, the firm reported cumulative nine-month adjusted net income of $2.7 billion, which is at the same level as the year-ago period. That said, the EPS figure has improved slightly from $3.04 to $3.14 over the same period, due to share buybacks. We expect fourth quarter results to be on the same lines. Overall, BNY Mellon is expected to report adjusted net income of $3.4 billion and annual EPS of $4.12 for the full year 2021.

(3) The stock price is estimated to be 2% below the current market price

we get here BNY Mellon Valuation, using an EPS estimate of approximately $4.12 in fiscal year 2021 and a P/E multiplier of above 15x. This translates to a price of $63, which is 2% less than the current market price of $64.

Note: P/E multipliers are based on year-end share price and reported (or expected) adjusted earnings for the full year

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