On Tuesday, Morgan Stanley (NYSE:MS) maintained its Equalweight rating on Bank of New York Mellon (NYSE:NYSE:BK) but increased the stock's price target to $82 from $80. The firm's analyst highlighted recent discussions with the company's CEO, Robin Vince, at the Morgan Stanley Asia Pacific Summit in Tokyo and Singapore. The conversations revealed expectations for operational leverage to continue improving due to the efficiencies gained from the One BNY initiative.
The analyst predicts that the Year of the Snake will be favorable for the company, as it is anticipated to sustain operational leverage. This outlook is based on the implementation of One BNY, a strategy that aims to streamline operations and enhance service delivery across the bank's entire organization.
Bank of New York Mellon's earnings per share (EPS) for the years 2025 and 2026 are projected to increase by approximately 1% and 2%, respectively. This growth is expected to be driven by an expansion in capital markets and the conclusion of quantitative tightening (QT), which should lead to a rise in deposit growth. These factors are believed to serve as counterbalances to the potential negative impact of declining interest rates.
In other recent news, The Bank of New York Mellon Corporation (BNY Mellon) has reported a 22% year-over-year increase in earnings per share to $1.50 and a 5% rise in total revenue, reaching $4.6 billion. The bank has also issued $750 million in aggregate principal amount of 5.225% Fixed Rate / Floating Rate Callable Senior Medium-Term Notes Series J, due in 2035. This move is part of BNY Mellon's broader capital and liquidity management strategy.
Additionally, BNY Mellon has completed its acquisition of Archer Holdco, LLC, a technology-driven managed account solutions provider, expected to enhance its service offerings. Analyst firms Deutsche Bank (ETR:DBKGn), Barclays (LON:BARC), and Citi have adjusted their price targets for BNY Mellon, reflecting its strong financial performance.
BNY Mellon's management revised their Net Interest Income (NII) forecast for 2024 upwards, predicting a 5% year-over-year decrease. The bank is also expected to achieve positive operating leverage in 2025, benefiting from strong fee performance and a commitment to controlling expenses.
Furthermore, BNY Mellon has established a dedicated hub with several hundred employees, demonstrating a commitment to AI investment.
However, Citi's analysis suggests that these positive projections are already reflected in the current stock price, maintaining its Neutral rating. These are recent developments that investors should be aware of.
InvestingPro Insights
Recent data from InvestingPro adds depth to Morgan Stanley's optimistic outlook on Bank of New York Mellon (NYSE:BK). The company's market capitalization stands at $59.14 billion, reflecting its significant presence in the financial sector. BK's P/E ratio of 14.43 (adjusted for the last twelve months as of Q3 2024) suggests a reasonable valuation relative to its earnings, aligning with the analyst's positive stance.
InvestingPro Tips highlight BK's strong dividend history, having raised its dividend for 14 consecutive years and maintained payments for 54 years. This consistency in shareholder returns complements the operational efficiencies expected from the One BNY initiative. The company's revenue growth of 3.48% over the last twelve months and 4.71% in Q3 2024 supports the analyst's projection of continued operational leverage.
Moreover, BK's impressive price performance, with a 76.52% total return over the past year and trading near its 52-week high, reflects investor confidence in the company's strategy and market position. These metrics reinforce Morgan Stanley's decision to maintain an Equalweight rating while raising the price target.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips on Bank of New York Mellon, providing a broader perspective on the company's financial health and market position.
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