On Thursday, Citi updated its financial model for Bank of New York Mellon (NYSE:BK), leading to an increase in the price target from $65.00 to $70.00, while keeping a neutral rating on the stock. The adjustment comes following a revision of forecasted interest rates and a review of management's remarks at a recent industry conference.
The revised price target is based on an elevated assumption of the bank's normalized Return on Tangible Common Equity (ROTCE), now expected to be 23%, which aligns with management's guidance, compared to the previous expectation of 22%. Citi's near-term earnings estimates for Bank of New York Mellon remain mostly unchanged, but projections for 2026 have been increased due to a more positive outlook for the Securities Services and Market & Wealth Services segments.
For 2024, Citi has slightly lowered its estimated earnings per share (EPS) for the bank by $0.05 to $5.60, which is just a cent below the FactSet consensus estimate of $5.59. The 2025 EPS estimate remains steady at $6.15, in contrast to FactSet's estimate of $6.26. Looking further ahead, Citi's 2026 EPS estimate has been raised by $0.10 to $6.75, which is still below the FactSet consensus of $6.96.
In other recent news, The Bank of New York Mellon Corporation (BNY Mellon) has made significant moves in the financial market. The company announced its acquisition of Archer Holdco, LLC, a technology-driven managed account solutions provider. The acquisition, expected to be completed in the fourth quarter of 2024, aims to enhance BNY Mellon's managed account services.
Furthermore, BNY Mellon has settled a $5 million charge with the U.S. Commodity Futures Trading Commission (CFTC) over swap transaction-related issues. As part of the settlement, BNY Mellon committed to hiring an independent compliance consultant to improve its compliance program.
In financial developments, BNY Mellon issued $2.5 billion in mixed rate notes, split into both fixed and floating rate securities. The issuance includes four series of notes with varying terms and interest rates.
On the analyst front, Deutsche Bank raised its price target to $63, Goldman Sachs increased its target to $74, and Citi revised its stance from Buy to Neutral, setting a price target of $65. These revisions followed BNY Mellon's strong second quarter performance.
Lastly, the company returned over $900 million of capital to shareholders, emphasizing its commitment to shareholder returns. These are the recent developments in BNY Mellon's operations.
InvestingPro Insights
As investors digest the recent updates from Citi on Bank of New York Mellon (NYSE:BK), it's worth considering additional insights from InvestingPro. With a market capitalization of $52.42 billion and a P/E ratio standing at 17.07, the bank presents a picture of stability in the financial sector. Notably, Bank of New York Mellon has a track record of raising its dividend for 13 consecutive years and maintains a strong dividend yield of 2.65%, reflecting a commitment to shareholder returns.
InvestingPro Tips highlight that the bank is trading at a low P/E ratio relative to near-term earnings growth, suggesting potential value for investors looking at earnings potential. Moreover, analysts predict profitability for the bank this year, backed by a high return over the last year and a significant price uptick over the last six months. These factors, coupled with the bank's long history of dividend payments—maintained for 54 consecutive years—paint a comprehensive picture of the bank's financial health and prospects.
For those seeking more in-depth analysis, InvestingPro offers additional tips on Bank of New York Mellon, which can be accessed for a deeper dive into the company's financials and market performance.
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