2. Bank of New York Mellon
Bank of New York Mellon
closed at $23.71 Monday, returning 21% year-to-date, following a 33% decline during 2011.
The shares trade for 2.3 times tangible book value, and for 10 times the consensus 2013 EPS estimate of $2.40. The consensus 2012 EPS estimate is $2.06.
Based on a quarterly payout of 13 cents, the shares have a dividend yield of 2.19%.
Bank of New York Mellon reported second-quarter net income applicable to common shareholders of $466 million, or 39 cents a share, including a litigation charge of $212 after tax, or 18 cents a share. Excluding the litigation charge, second-quarter operating earnings were 57 cents a share.
In comparison, the company reported earnings applicable to common shareholders of $619 million, or 52 cents a share, in the first quarter, and $735 million, or 59 cents a share, during the second quarter of 2011.
The company's second-quarter return on tangible common equity was 15.7%, declining from 21.0% the previous quarter, and 26.3% a year earlier.
Bank of New York Mellon's second-quarter net interest margin was 1.25%, narrowing from 1.32% in the first quarter, and 1.41% in the second quarter of 2011. Net interest income made up 20% of total second-quarter revenue.
Mosby estimates that the company will see its net interest margin contract by another three basis points through the end of 2013.
The analyst rates Bank of New York Mellon a "Buy," and on Monday raised his price target for the shares by a dollar, to $29, and said "We expect BK to earn a 22% return on tangible common equity in 2013 with an estimated cost of equity around 11%."
Mosby said that "while BK currently trades at a 142% premium to its 2012 year-end tangible book value as compared to an average 105% premium for the Trust Banks, our analysis suggests that BK's fundamental strength should warrant approximately a 165% premium," and also highlighted "WFC and BK as two Large Cap Banks that we believe still have significantly more upside potential with less than 20% downside risk if market perception begins to turn unfavorable again."
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