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Bank of New York Mellon CEO's Dilemma

Bank of New York Mellon Chairman and CEO Robert Kelly may have thought turning around Bank of America was an unenviable task, but his current gig doesn't look especially fun at the moment.
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NEW YORK (

TheStreet

) --

Bank of New York Mellon

(BK) - Get Report

Chairman and CEO Robert Kelly may have thought turning around

Bank of America

(BAC) - Get Report

was an unenviable task, but his current gig doesn't look especially fun at the moment.

Rochdale Securities analyst Richard Bove published a report Monday questioning Kelly's commitment to Bank of New York Mellon. Bove cited a report in

The Wall Street Journal

which stated that Kelly withdrew his name from consideration for the top job at Bank of America after Treasury officials expressed concerns that a $35 million to $40 million pay package he sought "might cause alarm and be seen as excessive."

Bove wrote that the article raised a question about Kelly's commitment to Bank of New York Mellon.

"Is he here for the duration or will he jump if some other institution, not as influenced by the government, meets his price?" Bove asked.

Calls to Kelly were referred to Bank of New York Mellon spokesman Ron Gruendl, who said Kelly chose to stay at Bank of New York Mellon because of growth opportunities he saw at the bank.

"Bank of America pursued Bob Kelly and they never really got close," Gruendl said.

Bove also questions the performance of Kelly, since Bank of New York Mellon stock is well below where it was when Kelly took over as CEO of legacy Mellon Financial in February 2006. He argues Bank of New York Mellon, like its main rivals

State Street

(STT) - Get Report

TheStreet Recommends

and

Northern Trust

(NTRS) - Get Report

, has not been charging enough for its core business of transaction services, such as processing debt payments made by the U.S. Treasury.

Bove says Bank of New York Mellon has about a 50% market share in this business, while

JPMorgan Chase

(JPM) - Get Report

, its closest rival, has 25% of the market. In other types of transaction services and custodies businesses, Bank of New York Mellon also has few competitors, aside from State Street, Northern Trust and, in some instances, JPMorgan,

U.S. Bancorp

(USB) - Get Report

and

Citigroup

(C) - Get Report

, Bove says.

Gruendl retorts that Bank of New York Mellon's stock has outperformed that of State Street and the KBW Bank Index and Standard & Poor's Financial Index since Kelly joined the company.

That relative outperformance may not last for long. Other analysts, including Keefe Bruyette & Woods' Robert Lee, and Chris Whalen, co-founder of Institutional Risk Analytics, have expressed concern about future revenues at Bank of New York Mellon. Earlier this month, Whalen downgraded Bank of New York and State Street from positive to neutral, while reaffirming a positive outlook on Northern Trust. Also this month, KBW's Lee raised State Street and Northern Trust to outperform while leaving Bank of New York Mellon unchanged at market perform.

--

Written by Dan Freed in New York

.