Bank of New York Lower After Profit Drop Due to Low Rates

Bank of New York Mellon shares fell after the company reported declines in earnings and revenue that stemmed from low interest rates.
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Bank of New York Mellon  (BK) - Get Report shares fell on Wednesday after the banking company reported declines in fourth-quarter earnings and revenue that stemmed from low interest rates.

Net income fell to $755 million, or 79 cents a share, from $1.45 billion, or $1.52, in the year-earlier quarter. Adjusted earnings per share totaled 96 cents, down from $1.01.

Revenue dropped 20% to $3.84 billion from $4.78 billion a year earlier.

A survey of analysts by FactSet produced consensus estimates of earnings of $1.08 a share, on both GAAP and adjusted bases, on revenue of $3.9 billion.

At last check Bank of New York Mellon shares were off 5.9% at $43.12. The shares have fallen 9% over the past year. 

“While the full-year impact of low interest rates will be a significant headwind in 2021, we ended the year with momentum in our core franchise,” Chief Executive Todd Gibbons said in a statement.

“We feel good about our business model and the power of the open architecture platforms and solutions we provide to help our clients grow their businesses.”

Morningstar analyst Rajiv Bhatia put fair value at $48 before the earnings report.

While the analyst “can see how BNY’s Mellon’s seven lines of business seem bulky, management in recent years has been aggressively focusing on expense control and we’d note that the firm consistently sees 15%-plus returns on tangible equity,” Bhatia wrote in November. 

“Given pricing pressure and the low interest rate environment, we expect management to keep a lid on expense growth.”

He likes Bank of New York Mellon's custody business. The group is the biggest custodian bank in the world.