BNY Mellon Stock Is Up 16% Year-To-Date; Is There Room for Further Growth?

BNY Mellon (NYSE: BK) stock is up 16% year-to-date, in line with the S&P 500 over the same period. By comparison, BNY Mellon’s peer BlackRock (NYSE: BLK) is up 5% year-to-date. Overall, at its current price of $60 per share, BK is trading 7% below its fair value of $65, Trefis’ estimate for 2019. BNY Mellon Review.

In the current financial environment, BK stock has seen extremely strong gains of 50%, from $40 in early January 2021 to around $60 today, compared to an increase of around 45% for the S&P 500 over that roughly 3-year period. However, BK stock’s increase has been far from consistent. The stock’s returns have been 37% in 2021, -22% in 2022, and 14% in 2023. In comparison, the S&P 500’s returns have been 27% in 2021, -19% in 2022, and 24% in 2023, indicating that BK underperformed the S&P in 2022 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been tough in recent years for individual stocks; for financial heavyweights including JPM, V and MA, and even mega-cap stars GOOG, TSLA and MSFT. In contrast, the Trefis High Quality portfolio, with a collection of 30 stocks, has has outperformed the S&P 500 every year during the same period. Why is that? As a group, the stocks in the HQ portfolio have delivered better returns with less risk compared to the benchmark; there are fewer roller coasters, as shown by the HQ portfolio performance indicators. Given the current uncertain macroeconomic environment, with high oil prices and high interest rates, could BK face a situation similar to that of 2022 and 2023 and underperform the S&P over the next 12 months – or will there be a sharp increase?

The custody banking giant beat Street estimates for Q1 2024. It posted total revenue of $4.5 billion, up 3% year over year, driven by a 6% increase in total fees and other income, partially offset by an 8% decline in net interest income. While total fee income benefited from growth in investment services fees and investment income, NII suffered from a lower net interest margin. Notably, assets under custody and administration (AuC/A) increased 5% year over year to $48.8 trillion, followed by a 6% increase in assets under management (AuM) to $2 trillion. In total, this resulted in adjusted net income of $982 million, up 7% year over year.

The company’s revenue increased 7% year-over-year to $17.5 billion in fiscal 2023, driven by a 24% increase in NII and a 2% increase in total fees and other revenues. It is noted that total fees and other revenues contribute more than 70% of total revenues. In terms of costs, total expenses as a percentage of revenues saw a favorable decline during the year, leading to a 33% improvement in adjusted net income to $3.15 billion.

We expect Q2 results to be similar. Consensus estimates for Q2 revenue and earnings are $4.52 billion and $1.42, respectively. Overall, BNY Mellon is expected to post revenue of $18.02 billion for fiscal 2024. Additionally, adjusted net profit margin will likely be around 22.5% during the year, resulting in full-year GAAP EPS of $5.45. This, combined with a P/E multiple of just under 12x, will lead to a valuation of $65.

Invest with Trefis Market-beating portfolios

See everything Trefis Price estimates