Updated Research Report on BNY Mellon - Analyst Blog

We issued an updated research report on The Bank of New York Mellon Corporation BK on June 3, 2014. The company's better-than-expected first-quarter results, efficient cost-control measures and considerable organic growth prospect seem impressive. However, we remain concerned about the overall subdued economic scenario and stringent regulatory environment.

BNY Mellon's released its first-quarter 2014 earnings on Apr 22. Earnings not only surpassed the Zacks Consensus Estimate but also rose 14.0% year over year. Results benefited from improvement in net interest income, fee income and reduced expenses, partially offset by lower benefit from provision.

Further, BNY Mellon's restructuring initiatives to control expenses are commendable. Moreover, considering its healthy liquidity position, the company is set to grow via acquisitions. Therefore, going forward, we expect the top line to continue benefiting from restructuring initiatives as well as meaningful acquisitions.

However, given the still low interest rate environment and sluggish economic growth, BNY Mellon's interest income as well as net interest margin continues to be under pressure. Also, the company's excessive dependence on fee income might prove detrimental to its financial health as these are prone to changes in individual investment preferences, regulatory amendments or a slowdown in capital market activities.

The Zacks Consensus Estimate for 2014 decreased 2.1% to $2.37 per share over the last 60 days. For 2015, the Zacks Consensus Estimate inched down 1.5% to $2.67 per share over the same time period.

Currently, BNY Mellon has a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some better-ranked banks include BofI Holding, Inc. BOFI, Central Pacific Financial Corp. CPF and CVB Financial Corp. CVBF. All these stocks sport a Zacks Rank #1 (Strong Buy).