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Bank of New York: Buyback Winner

NEW YORK ( TheStreet) -- Bank of New York Mellon (BK - Get Report) was the big winner among the largest U.S. banking names on Thursday, with shares rising 5% to close at $24.28.

The U.S. Labor Department reported that jobless claims for the weekend ended March 10 fell to a seasonally adjusted 351,000, declining by 14,000 from the previous week. The Labor Department also reported that the total number of people claiming unemployment benefits in all of the department's programs for the weekend ended Feb. 25 was 7,424,040, increasing by 36,392 from the previous week.

The broad indexes saw moderate gains, while banks continued to roar ahead as investors digested the mostly positive results in the Federal Reserve's annual stress test announcement on Tuesday. The KBW Bank Index (I:BKX) rose 3% to close at 49.41, with all 24 index components rising for the session.

Bank of New York Mellon's shares have now risen 23% year-to-date, following a 33% drop during 2011.

The large bank holding companies subject to the Federal Reserve's 2012 capital were stress-tested under a severe economic scenario that included real U.S.

In order to pass the stress tests, the results had to show that the group of 19's estimated Tier 1 common equity ratios would remain over 5% under the adverse economic scenario.

In order to have their capital plans approved, the companies' estimated Tier 1 capital ratios at the end of 2013 would have to be above 5%, "with all proposed capital actions through Q4 2013."

The Federal Reserve announced on Tuesday that under the severe economic scenario, Bank of New York Mellon's Tier 1 common equity ratio would be a very strong 13.3% -- reflecting the company's capital strength, but also its limited loan exposure -- and that if the company were to follow through with its plans to return capital to investor's its Tier 1 common equity ratio would decline only slightly, to 13.0% at the end of 2013.

Bank of New York Mellon announced on Tuesday the Fed didn't object to its plans to "repurchase of up to $1.16 billion of outstanding common stock and the continuation of its 13 cents per quarter dividend over the next 12 months."

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Bank of New York Mellon's shares trade for 2.6 times the company's reported tangible book value of $8.91 a share, as of Dec. 30, and for 11 times the consensus 2012 earnings estimate of $2.24 a share, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is $2.46.

Interested in more on Bank of New York Mellon? See TheStreet Ratings' report card for this stock.
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C $44.70 -1.90%
BK $39.53 -0.70%
TSLA $232.00 -0.14%


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