) primarily competes with State Street (
) and Citigroup (
) in providing investment servicing (asset servicing, issuer
services, clearing services) and investment management services to
institutional investors around the world. Here we highlight 3 of
the most important drivers for BNY Mellon's business and the
potential upside and downside stemming from their key trends.
Our price estimate for BNY Mellon stock stands at
, roughly 25% ahead of market price.
8% Downside - Lower Assets under Management
We currently forecast BNY Mellon's AuM will increase from $1.2
trillion in 2010 to over $2.2 trillion in the coming years driven
by rising inflow of funds from emerging markets. However, a much
slower growth to only $1.5 trillion would result in a downside of
7-8% to the Trefis price estimate for BNY Mellon.
Such a scenario can come into play as more and more people
invest through online brokerage networks, which increasingly offer
sophisticated value-added services such as advisory, reporting and
portfolio tracking thereby reducing funds inflows to asset
3-4% Upside - Higher Assets under Custody
We currently forecast BNY Mellon's AuC will increase from $25
trillion in 2010 to over $43 trillion by the end of the forecast
period. However, a higher growth in BNY Mellon's to $50 trillion
driven by a faster than expected growth in emerging markets would
mean an upside of 3-4% to the Trefis price estimate for BNY Mellon.
Similarly a slower growth due to slower than expected economic
recovery may lead to a downside to our estimate.
Servicing Fee as a % of Assets under Custody
BNY Mellon's stock is highly sensitive to this driver primarily
because the firm has huge amounts of Assets under Custody ($25
trillion at 2010 end). Historically servicing fee as a % of Assets
under Custody (AuC) has varied quite frequently, but its range has
been pretty limited from 0.010% to 0.012%. We currently forecast
the asset servicing fee to remain constant as a % of Assets under
Custody. However, there could be significant upside or downside to
the Trefis price estimate if servicing fee increases or decreases
as a % of AuC in the future.
Drag the trend lines above to see the impact of these forecast
charts on the stock price. Visit our site to see the complete
impact of these changes.
See our complete analysis for BNY Mellon's stock