On Jun 11, 2013, we reiterated our long-term recommendation on
The Bank of New York Mellon Corporation
) at Neutral. This is based on its capital deployment activities
and various restructuring initiatives and acquisitions. However,
the company reported unfavorable first-quarter 2013 results.
BANK OF NY MELL (BK): Free Stock Analysis
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Why the Neutral Stance?
The Bank of New York Mellon Corporation's first-quarter 2013
adjusted earnings of 50 cents per share lagged the Zacks
Consensus Estimate by 2 cents. Also, this compared unfavorably
with the prior-quarter earnings of 53 cents. Lower-than-expected
results were mainly due to a rise in operating expenses and lower
net interest income, partially offset by almost stable fee
income. However, asset quality continued to show improvement and
capital ratios remained healthy. Further, BNY Mellon's asset
position continued to improve.
Following the first-quarter 2013 earnings, the Zacks Consensus
Estimate went down by 2.2% to $2.25 per share over the last 60
days. Also, for 2014, the Zacks Consensus Estimate went down by
0.8% to $2.55 per share over the same time frame. The company
currently has a Zacks Rank #3 (Hold).
On Apr 9, 2013, BNY Mellon hiked its quarterly dividend by 15% to
15 cents per share, following the approval of its capital plan by
the Federal Reserve. The company also announced a new share
repurchase program, authorizing the purchase of upto $1.35
billion common stock through the first quarter of 2014.
Moreover, over the last few years, BNY Mellon has completed
several acquisitions both in the U.S. and overseas. This is
expected to benefit the company in terms of both increased
revenue and cross-selling opportunities.
On the other hand, BNY Mellon is anticipated to experience
significant margin pressures in the near-to-mid-term due to the
persistent low interest-rate environment. Moreover, BNY Mellon
has been consistently experiencing mounting expenses.
Other Banks to Consider
Some better performing banks include
Enterprise Financial Services Corp
Old Second Bancorp Inc
Tower Financial Corporation
). All these carry a Zacks Rank #1 (Strong Buy).