On Dec 3, 2013, we reaffirmed our long-term recommendation on
The Bank of New York Mellon Corporation
) at Neutral. This was based on the company's
better-than-expected third-quarter results as well as the various
restructuring initiatives and acquisitions. However, pressure on
net interest margin and rising operating expenses remain
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Why the Neutral Stance?
BNY Mellon's third-quarter adjusted earnings per share marginally
beat the Zacks Consensus Estimate. Results benefited from a rise
in revenues, partially offset by higher non-interest expenses.
Additionally, BNY Mellon remains on track to achieve its targeted
cost savings by the end of 2013. Moreover, the company is an
attractive pick for yield-seeking investors due to its steady
capital deployment activities. This also reflects the bank's
strong capital position.
On the flip side, BNY Mellon will likely experience significant
margin pressure in the near-to-mid-term due to the persistent low
interest rate environment. Further, despite undertaking cost
savings initiatives, the company's expenses continue to
rise. Also, we do not expect any significant reduction in
BNY Mellon's expenses due to the company's continuous expansion
of its global footprint.
Following the third-quarter results, the Zacks Consensus Estimate
for 2013 has remained stable at $2.28 per share over the last 60
days. For 2014, the Zacks Consensus Estimate fell nearly 1% to
$2.50 per share over the same time frame. Hence, BNY Mellon
currently carries a Zacks Rank #3 (Hold).
Other Banks to Consider
Some better-ranked banks include
Fifth Third Bancorp
Huntington Bancshares Incorporated
). All these carry a Zacks Rank #2 (Buy).