On December 27, we reiterated our 'Neutral' recommendation on
The Bank of New York Mellon Corporation
) based on its improving top line and stable capital position.
However, elevated expenses and unsettling macro economic issues
remain the major concerns. Moreover, BNY Mellon - a bank holding
company and one of the world's leading financial institutions -
retains a Zacks #3 Rank (Hold).
Why the Neutral Stance?
BNY Mellon's third quarter 2012 earnings came in at 57 cents,
marginally ahead of the Zacks Consensus Estimate of 54 cents per
share. Revenues increased 2.0% from the year-ago period to $3.65
billion, slightly outpacing the Zacks Consensus Estimate of $3.59
billion. Over the past four quarters, BNY Mellon has delivered an
average earnings surprise of only 5.4%.
Moreover, over the last 60 days, the Zacks Consensus Estimate for
2012 remained almost unchanged. In addition, the company's sound
capital deployment activities, robust restructuring initiatives
and opportunistic acquisitions have helped it sustain the Neutral
recommendation. The top line is expected to benefit from various
restructuring initiatives and acquisitions. Extensive capital
deployment activities also continue to reinforce investors'
confidence in the stock.
However, the low interest rate environment and changing
regulatory landscape are expected to undermine its revenue growth
in the subsequent quarters. In addition, we remain wary of the
continuously rising operating expenses. The company is trying to
rein in costs and has undertaken several measures in the third
quarter of 2012, including leveraging of Eastern European
operations acquired from
PNC Financial Services Group Inc
) Global Investment Servicing Business, client conversion upon
acquisition of Germany-based BHF Asset Servicing GmbH and
consolidation of business operations, to counter it. However, we
do not anticipate cost-trimming initiatives to fully control the
rising costs as the company continues to expand globally, which
entail numerous regulatory and legal expenses.
Other Stocks to Consider
Other banking stocks that are currently performing well include
Heartland Financial USA Inc.
First Community Bancshares, Inc. (Bluefield)
). All these companies carry a Zacks #1 Rank (Strong Buy).
BANK OF NY MELL (BK): Free Stock Analysis
FIRST COMM BCSH (FCBC): Free Stock Analysis
HEARTLAND FINCL (HTLF): Free Stock Analysis
IBERIABANK CORP (IBKC): Free Stock Analysis
PNC FINL SVC CP (PNC): Free Stock Analysis
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