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Higher Rates, Loan Growth to Aid BNY Mellon's (BK) Q4 Earnings
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The Bank of New York Mellon Corporation (BK - Free Report) is scheduled to report fourth-quarter and 2022 results on Jan 13, before market open. Its revenues and earnings in the to-be-reported quarter are expected to have witnessed increases on a year-over-year basis.
In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate. Results were aided by a rise in net interest revenues. However, asset balances witnessed a decline and higher expenses hurt results to some extent.
BNY Mellon has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three and met in one of the trailing four quarters, with a surprise of 3.7%, on average.
The Bank of New York Mellon Corporation Price and EPS Surprise
The Zacks Consensus Estimate for the company’s fourth-quarter earnings is pegged at $1.19, which has been revised 3.5% higher over the past seven days. The consensus estimate indicates a rise of 14.4% from the year-ago quarter’s reported number. Our estimate for fourth-quarter earnings is $1.09.
The consensus estimate for sales is pegged at $4.34 billion, implying an 8.2% rise from the prior-year quarter’s reported figure. Our estimate for the same is $4.14 billion.
Key Factors & Estimates for Q4
Fee Revenues: Supported by overall asset inflows in the fourth quarter, BNY Mellon is expected to have recorded an improvement in the total assets under management (AUM) balance. Thus, the related fee is likely to have increased.
The Zacks Consensus Estimate for total investment services fee (comprising more than 50% of the company’s total revenues) is pegged at $2.08 billion, which indicates a rise of 1% from the prior-year quarter’s reported number. Our estimate for the same is $2 billion, indicating a year-over-year decline of 2.5%.
The consensus mark for financing-related fees is pegged at $43.26 million, which suggests an 8% year-over-year decline. Our estimate for financing-related fees is $42.8 million, indicating a decline of 9%.
The consensus estimate for distribution and servicing fees is pegged at $32.29 million, indicating 15.3% growth from the previous-year quarter’s reported figure. Our estimate for the same is $29.8 million, suggesting year-over-year growth of 6.6%.
The consensus estimate for foreign exchange revenues is pegged at $200 million, suggesting a marginal rise from the prior-year quarter. Our estimate is $198.5 million, indicating a marginal decline. The consensus mark for investment and other income of $70 million suggests a year-over-year decline of 34.6%.
The consensus estimate for total fees and other revenues is pegged at $3.32 billion, suggesting a marginal decline from the prior-year quarter. Our estimate for the same is $3.19 billion, indicating a year-over-year decline of 4.5%.
Management expects 2022 fee revenues to be marginally down on the assumption that equity and fixed-income values, as well as currencies, stay at the third-quarter end level.
Net Interest Revenues: The overall lending scenario was decent in the fourth quarter. In addition to loan growth, there was a rise in interest rates in the quarter. The Federal Reserve continued with its ultra-hawkish monetary policy stance, raising interest rates by another 125 basis points in the quarter. Thus, the policy rate reached 4.25-4.50%, the highest in the past 15 years.
Thus, despite the inversion of the yield curve, BNY Mellon’s interest income is expected to have been positively impacted in the quarter, supported by loan growth and higher rates. The consensus mark for NIR for the fourth quarter is pegged at $960 million, indicating 41.8% year-over-year growth. Our estimate for NIR is $947.7 million, suggesting a year-over-year rise of 40%.
Notably, management expects 2022 NIR to be up almost 30%, assuming interest rates to follow the forward curve, deposit run-offs to be modest and deposit betas to decline.
Expenses: Because of higher litigation and restructuring charges, BNY Mellon’s expenses have been elevated over the past few years. Nevertheless, overall costs are expected to have been manageable in the quarter under review, given the elimination of unnecessary management layers.
Management expects expenses (excluding notable items) in 2022 to increase at the lower end of 5-5.5%. The company expects strong inflationary headwinds to largely offset the favorable impacts of the stronger U.S. dollar. Our estimate for fourth-quarter non-interest expenses is $3.02 billion.
What the Zacks Model Unveils
According to our quantitative model, the chances of BNY Mellon beating the Zacks Consensus Estimate this time are high. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better — which is required to increase the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for BNY Mellon is +6.31%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Other Stocks That Warrant a Look
A couple of other finance stocks that you may want to consider, as these too have the right combination of elements to post an earnings beat in their upcoming releases, per our model, are BlackRock, Inc. (BLK - Free Report) and Hancock Whitney Corporation (HWC - Free Report) .
The Earnings ESP for BlackRock is +3.06% and it carries a Zacks Rank #3 at present. The company is slated to report fourth-quarter 2022 results on Jan 13.
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Higher Rates, Loan Growth to Aid BNY Mellon's (BK) Q4 Earnings
The Bank of New York Mellon Corporation (BK - Free Report) is scheduled to report fourth-quarter and 2022 results on Jan 13, before market open. Its revenues and earnings in the to-be-reported quarter are expected to have witnessed increases on a year-over-year basis.
In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate. Results were aided by a rise in net interest revenues. However, asset balances witnessed a decline and higher expenses hurt results to some extent.
BNY Mellon has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three and met in one of the trailing four quarters, with a surprise of 3.7%, on average.
The Bank of New York Mellon Corporation Price and EPS Surprise
The Bank of New York Mellon Corporation price-eps-surprise | The Bank of New York Mellon Corporation Quote
The Zacks Consensus Estimate for the company’s fourth-quarter earnings is pegged at $1.19, which has been revised 3.5% higher over the past seven days. The consensus estimate indicates a rise of 14.4% from the year-ago quarter’s reported number. Our estimate for fourth-quarter earnings is $1.09.
The consensus estimate for sales is pegged at $4.34 billion, implying an 8.2% rise from the prior-year quarter’s reported figure. Our estimate for the same is $4.14 billion.
Key Factors & Estimates for Q4
Fee Revenues: Supported by overall asset inflows in the fourth quarter, BNY Mellon is expected to have recorded an improvement in the total assets under management (AUM) balance. Thus, the related fee is likely to have increased.
The Zacks Consensus Estimate for total investment services fee (comprising more than 50% of the company’s total revenues) is pegged at $2.08 billion, which indicates a rise of 1% from the prior-year quarter’s reported number. Our estimate for the same is $2 billion, indicating a year-over-year decline of 2.5%.
The consensus mark for financing-related fees is pegged at $43.26 million, which suggests an 8% year-over-year decline. Our estimate for financing-related fees is $42.8 million, indicating a decline of 9%.
The consensus estimate for distribution and servicing fees is pegged at $32.29 million, indicating 15.3% growth from the previous-year quarter’s reported figure. Our estimate for the same is $29.8 million, suggesting year-over-year growth of 6.6%.
The consensus estimate for foreign exchange revenues is pegged at $200 million, suggesting a marginal rise from the prior-year quarter. Our estimate is $198.5 million, indicating a marginal decline. The consensus mark for investment and other income of $70 million suggests a year-over-year decline of 34.6%.
The consensus estimate for total fees and other revenues is pegged at $3.32 billion, suggesting a marginal decline from the prior-year quarter. Our estimate for the same is $3.19 billion, indicating a year-over-year decline of 4.5%.
Management expects 2022 fee revenues to be marginally down on the assumption that equity and fixed-income values, as well as currencies, stay at the third-quarter end level.
Net Interest Revenues: The overall lending scenario was decent in the fourth quarter. In addition to loan growth, there was a rise in interest rates in the quarter. The Federal Reserve continued with its ultra-hawkish monetary policy stance, raising interest rates by another 125 basis points in the quarter. Thus, the policy rate reached 4.25-4.50%, the highest in the past 15 years.
Thus, despite the inversion of the yield curve, BNY Mellon’s interest income is expected to have been positively impacted in the quarter, supported by loan growth and higher rates. The consensus mark for NIR for the fourth quarter is pegged at $960 million, indicating 41.8% year-over-year growth. Our estimate for NIR is $947.7 million, suggesting a year-over-year rise of 40%.
Notably, management expects 2022 NIR to be up almost 30%, assuming interest rates to follow the forward curve, deposit run-offs to be modest and deposit betas to decline.
Expenses: Because of higher litigation and restructuring charges, BNY Mellon’s expenses have been elevated over the past few years. Nevertheless, overall costs are expected to have been manageable in the quarter under review, given the elimination of unnecessary management layers.
Management expects expenses (excluding notable items) in 2022 to increase at the lower end of 5-5.5%. The company expects strong inflationary headwinds to largely offset the favorable impacts of the stronger U.S. dollar. Our estimate for fourth-quarter non-interest expenses is $3.02 billion.
What the Zacks Model Unveils
According to our quantitative model, the chances of BNY Mellon beating the Zacks Consensus Estimate this time are high. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better — which is required to increase the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for BNY Mellon is +6.31%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Other Stocks That Warrant a Look
A couple of other finance stocks that you may want to consider, as these too have the right combination of elements to post an earnings beat in their upcoming releases, per our model, are BlackRock, Inc. (BLK - Free Report) and Hancock Whitney Corporation (HWC - Free Report) .
The Earnings ESP for BlackRock is +3.06% and it carries a Zacks Rank #3 at present. The company is slated to report fourth-quarter 2022 results on Jan 13.
Hancock Whitney is scheduled to release fourth-quarter 2022 earnings on Jan 17. The company, which carries a Zacks Rank #2 (Buy) at present, has an Earnings ESP of +0.59%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.