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Why Is Bank of New York Mellon (BK) Up 0.5% Since Last Earnings Report?
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A month has gone by since the last earnings report for Bank of New York Mellon (BK - Free Report) . Shares have added about 0.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Bank of New York Mellon due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
BNY Mellon’s Q4 Earnings Beat Estimates, Expenses Down
BNY Mellon reported a positive earnings surprise of 7.6% in fourth-quarter 2018. Adjusted earnings per share of 99 cents surpassed the Zacks Consensus Estimate of 92 cents. The figure reflects an improvement of 8.8% from the prior-year quarter.
Results benefited from an improvement in net interest revenues, lower operating expenses and no provisions. However, decline in total fee and other income, and disappointing assets position were the undermining factors.
After considering non-recurring items, net income applicable to common shareholders for the quarter under review was $832 million, down 26% from the prior-year quarter.
Adjusted earnings per share for 2018 increased 18% year over year to $4.21. Net income available to common shareholders was $4.1 billion or $4.04 per share compared with $3.9 billion or $3.72 per share recorded in 2017.
Revenues Decline, Costs Remain Stable
Total revenues (GAAP basis) for the reported quarter grew 7% year over year to $4 billion. Notably, on non-GAAP basis, revenues declined 1% from the prior-year quarter.
For 2018, total revenues (GAAP basis) increased 5% year over year to $16.4 billion.
Net interest revenues, on a fully taxable-equivalent basis (non-GAAP basis), were $889 million, up 3% year over year. The upside was primarily driven by higher interest rates and absence of lease related adjustment recorded in the prior-year quarter, partly offset by lower non-interest-bearing deposits.
Also, net interest margin expanded 8 basis points year over year to 1.24%.
Total fee and other revenues (non-GAAP basis) declined 1% year over year to $3.15 billion. Increase in investment services fees, foreign exchange and other trading revenues was more than offset by lower Investment management and performance fees, and financing-related fees, along with reduced investment and other income.
Total non-interest expenses were $2.98 billion, down 1% year over year. This reflects a decrease in all expense components, except for professional, legal and other purchased services, software and equipment, net occupancy, sub-custodian and clearing.
Dismal Asset Position
As of Dec 31, 2018, AUM was $1.7 trillion, down 9% year over year. This reflects lower market values, net outflows, divestiture of CenterSquare Investment Management and unfavorable impact of a stronger U.S. dollar.
Moreover, assets under custody and administration of $33.1 trillion decreased 1% year over year, reflecting lower market values and unfavorable impact of a strong U.S. dollar.
Credit Quality Improves
As of Dec 31, 2018, non-performing assets were $79 million, down from $90 million registered at the end of the prior-year quarter. In addition, allowance for loan losses decreased 13% year over year to $140 million.
There was no provision for credit losses in the quarter under review compared to a benefit of $6 million in the year-ago quarter.
Capital Position
As of Dec 31, 2018, common equity Tier 1 ratio was 10.6% compared with 10.3% as of Dec 31, 2017. Tier 1 Leverage ratio was 6.6%, up from 6.4% registered as of Dec 31, 2017.
Share Repurchase
During the reported quarter, BNY Mellon bought back 28.9 million shares for $1.37 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Bank of New York Mellon has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Bank of New York Mellon has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Bank of New York Mellon (BK) Up 0.5% Since Last Earnings Report?
A month has gone by since the last earnings report for Bank of New York Mellon (BK - Free Report) . Shares have added about 0.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Bank of New York Mellon due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
BNY Mellon’s Q4 Earnings Beat Estimates, Expenses Down
BNY Mellon reported a positive earnings surprise of 7.6% in fourth-quarter 2018. Adjusted earnings per share of 99 cents surpassed the Zacks Consensus Estimate of 92 cents. The figure reflects an improvement of 8.8% from the prior-year quarter.
Results benefited from an improvement in net interest revenues, lower operating expenses and no provisions. However, decline in total fee and other income, and disappointing assets position were the undermining factors.
After considering non-recurring items, net income applicable to common shareholders for the quarter under review was $832 million, down 26% from the prior-year quarter.
Adjusted earnings per share for 2018 increased 18% year over year to $4.21. Net income available to common shareholders was $4.1 billion or $4.04 per share compared with $3.9 billion or $3.72 per share recorded in 2017.
Revenues Decline, Costs Remain Stable
Total revenues (GAAP basis) for the reported quarter grew 7% year over year to $4 billion. Notably, on non-GAAP basis, revenues declined 1% from the prior-year quarter.
For 2018, total revenues (GAAP basis) increased 5% year over year to $16.4 billion.
Net interest revenues, on a fully taxable-equivalent basis (non-GAAP basis), were $889 million, up 3% year over year. The upside was primarily driven by higher interest rates and absence of lease related adjustment recorded in the prior-year quarter, partly offset by lower non-interest-bearing deposits.
Also, net interest margin expanded 8 basis points year over year to 1.24%.
Total fee and other revenues (non-GAAP basis) declined 1% year over year to $3.15 billion. Increase in investment services fees, foreign exchange and other trading revenues was more than offset by lower Investment management and performance fees, and financing-related fees, along with reduced investment and other income.
Total non-interest expenses were $2.98 billion, down 1% year over year. This reflects a decrease in all expense components, except for professional, legal and other purchased services, software and equipment, net occupancy, sub-custodian and clearing.
Dismal Asset Position
As of Dec 31, 2018, AUM was $1.7 trillion, down 9% year over year. This reflects lower market values, net outflows, divestiture of CenterSquare Investment Management and unfavorable impact of a stronger U.S. dollar.
Moreover, assets under custody and administration of $33.1 trillion decreased 1% year over year, reflecting lower market values and unfavorable impact of a strong U.S. dollar.
Credit Quality Improves
As of Dec 31, 2018, non-performing assets were $79 million, down from $90 million registered at the end of the prior-year quarter. In addition, allowance for loan losses decreased 13% year over year to $140 million.
There was no provision for credit losses in the quarter under review compared to a benefit of $6 million in the year-ago quarter.
Capital Position
As of Dec 31, 2018, common equity Tier 1 ratio was 10.6% compared with 10.3% as of Dec 31, 2017. Tier 1 Leverage ratio was 6.6%, up from 6.4% registered as of Dec 31, 2017.
Share Repurchase
During the reported quarter, BNY Mellon bought back 28.9 million shares for $1.37 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Bank of New York Mellon has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Bank of New York Mellon has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.