Bank of New York Double Upgraded on Earnings Prospects

Bank of New York Mellon was higher after Bank of America Securities double-upgraded the stock to buy and lifted its price target.
Author:
Publish date:

Bank of New York Mellon  (BK) - Get Report shares rose Wednesday after the custody bank titan was double-upgraded at Bank of America Securities, to buy from underperform, with a price-target increase to $50 from $43.

"Despite the near-term low-short-term interest-rate headwinds, we expect the combination of rising rates, strategic initiatives, and active expense/capital management to drive stronger revenue and earnings growth over the next few years," Analyst Michael Carrier wrote in a commentary.

BNY recently traded at $45.05, up 1.5%. It has gained 8% over the past month amid the rise in long-term interest rates. The stock’s valuation is attractive, Carrier said.

A continued rise in interest rates would help the banking company by boosting its revenue from interest and by eliminating the need for it to waive fees on money-market funds, he said.

BNY 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.

Last week came news that Bank of New York Mellon had invested in Fireblocks, a startup that specializes in cryptocurrency safekeeping. The bank's investment is part of a $133 million funding round.

Bank of New York Mellon is preparing to offer cryptocurrency custody services—storing and handling funds on behalf of customers—for the first time later this year.