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BNY Mellon (BK) Gains on Q2 Earnings Beat, Revenue Growth
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The Bank of New York Mellon Corporation’s (BK - Free Report) second-quarter 2024 adjusted earnings of $1.51 per share surpassed the Zacks Consensus Estimate of $1.43. Also, the bottom line reflects a rise of 9.4% from the prior-year quarter.
BK shares have gained more than 2% in the pre-market trading on better-than-expected results.
Results have been primarily aided by a rise in fee revenues and lower expenses. The assets under custody and/or administration (AUC/A) and assets under management (AUM) balances grew on a solid market rally. However, a decline in net interest revenues (NIR) hurt the results to some extent.
Net income applicable to common shareholders (GAAP basis) was $1.14 billion or $1.52 per share, up from $1.04 billion or $1.31 per share in the year-ago quarter. We had projected a net income applicable to common shareholders of $998.4 million.
Revenues Improve, Expenses Decline
Total revenues increased 2.1% year over year to $4.60 billion. The top line surpassed the Zacks Consensus Estimate of $4.54 billion.
NIR, on a fully taxable-equivalent (FTE) basis, was $1.03 billion, down 6.4% year over year. The decline reflected changes in balance sheet mix, partly offset by higher interest rates. Our estimate for the metric was $1 billion.
The net interest margin (FTE basis) contracted 5 basis points (bps) to 1.15%. Our estimate for NIM was 1.09%.
Total fee and other revenues increased 4.8% year over year to $3.57 billion. The rise was primarily driven by an increase in investment services fees, foreign exchange revenues, distribution and servicing fees, and investment and other revenues. Our estimate for the same was $3.48 billion.
Total non-interest expenses (GAAP basis) were $3.07 billion, down 1.3% from the prior-year quarter. The decline was due to a fall in costs related to professional, legal and other purchased services, distribution and servicing costs, expenses related to amortization of intangible assets, and other costs. Also, the company recorded negative bank assessment charges in the reported quarter. We had projected non-interest expenses of $3.11 billion.
Asset Balances Improve
As of Jun 30, 2024, AUM was $2.05 trillion, up 7.3% year over year. The rise reflected higher market values. Our estimate for AUM was $2.02 trillion.
The allowance for loan losses, as a percentage of total loans, was 0.40%, up 10 bps from the prior-year quarter. As of Jun 30, 2024, non-performing assets were $227 million, up significantly from $88 million in the last-year quarter.
In the reported quarter, the company did not record any provision for credit losses. In the prior-year quarter, provisions were $5 million. We had expected the metric to be $7.9 million.
Capital Position Solid
As of Jun 30, 2024, the common equity Tier 1 ratio was 11.4%, up from 11% as of the Jun 30, 2023 level. Tier 1 leverage ratio was 5.8%, up from 5.7% as of Jun 30, 2023.
Share Repurchase Update
In the reported quarter, BNY Mellon repurchased shares worth $601 million.
Our Take
High interest rates, BK’s global footprint and a strong balance sheet position are likely to keep supporting its top-line growth. However, concentration risk due to the company’s higher dependence on fee-based revenues, higher funding costs and elevated expenses are worrisome.
The Bank of New York Mellon Corporation Price, Consensus and EPS Surprise
BankUnited, Inc. (BKU - Free Report) is scheduled to report quarterly results on Jul 18. The Zacks Consensus Estimate for BKU’s second-quarter earnings has been unchanged over the past seven days. Currently, BKU carries a Zacks Rank of 3.
Truist Financial Corporation (TFC - Free Report) is slated to report quarterly results on Jul 22. The Zacks Consensus Estimate for TFC’s second-quarter earnings has been unchanged over the past seven days. TFC also carries a Zacks Rank of 3 at present.
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BNY Mellon (BK) Gains on Q2 Earnings Beat, Revenue Growth
The Bank of New York Mellon Corporation’s (BK - Free Report) second-quarter 2024 adjusted earnings of $1.51 per share surpassed the Zacks Consensus Estimate of $1.43. Also, the bottom line reflects a rise of 9.4% from the prior-year quarter.
BK shares have gained more than 2% in the pre-market trading on better-than-expected results.
Results have been primarily aided by a rise in fee revenues and lower expenses. The assets under custody and/or administration (AUC/A) and assets under management (AUM) balances grew on a solid market rally. However, a decline in net interest revenues (NIR) hurt the results to some extent.
Net income applicable to common shareholders (GAAP basis) was $1.14 billion or $1.52 per share, up from $1.04 billion or $1.31 per share in the year-ago quarter. We had projected a net income applicable to common shareholders of $998.4 million.
Revenues Improve, Expenses Decline
Total revenues increased 2.1% year over year to $4.60 billion. The top line surpassed the Zacks Consensus Estimate of $4.54 billion.
NIR, on a fully taxable-equivalent (FTE) basis, was $1.03 billion, down 6.4% year over year. The decline reflected changes in balance sheet mix, partly offset by higher interest rates. Our estimate for the metric was $1 billion.
The net interest margin (FTE basis) contracted 5 basis points (bps) to 1.15%. Our estimate for NIM was 1.09%.
Total fee and other revenues increased 4.8% year over year to $3.57 billion. The rise was primarily driven by an increase in investment services fees, foreign exchange revenues, distribution and servicing fees, and investment and other revenues. Our estimate for the same was $3.48 billion.
Total non-interest expenses (GAAP basis) were $3.07 billion, down 1.3% from the prior-year quarter. The decline was due to a fall in costs related to professional, legal and other purchased services, distribution and servicing costs, expenses related to amortization of intangible assets, and other costs. Also, the company recorded negative bank assessment charges in the reported quarter. We had projected non-interest expenses of $3.11 billion.
Asset Balances Improve
As of Jun 30, 2024, AUM was $2.05 trillion, up 7.3% year over year. The rise reflected higher market values. Our estimate for AUM was $2.02 trillion.
AUC/A of $49.5 trillion increased 5.5%, primarily reflecting higher market values.
Credit Quality: Mixed Bag
The allowance for loan losses, as a percentage of total loans, was 0.40%, up 10 bps from the prior-year quarter. As of Jun 30, 2024, non-performing assets were $227 million, up significantly from $88 million in the last-year quarter.
In the reported quarter, the company did not record any provision for credit losses. In the prior-year quarter, provisions were $5 million. We had expected the metric to be $7.9 million.
Capital Position Solid
As of Jun 30, 2024, the common equity Tier 1 ratio was 11.4%, up from 11% as of the Jun 30, 2023 level. Tier 1 leverage ratio was 5.8%, up from 5.7% as of Jun 30, 2023.
Share Repurchase Update
In the reported quarter, BNY Mellon repurchased shares worth $601 million.
Our Take
High interest rates, BK’s global footprint and a strong balance sheet position are likely to keep supporting its top-line growth. However, concentration risk due to the company’s higher dependence on fee-based revenues, higher funding costs and elevated expenses are worrisome.
The Bank of New York Mellon Corporation Price, Consensus and EPS Surprise
The Bank of New York Mellon Corporation price-consensus-eps-surprise-chart | The Bank of New York Mellon Corporation Quote
Currently, BNY Mellon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Release Dates of Other Major Banks
BankUnited, Inc. (BKU - Free Report) is scheduled to report quarterly results on Jul 18. The Zacks Consensus Estimate for BKU’s second-quarter earnings has been unchanged over the past seven days. Currently, BKU carries a Zacks Rank of 3.
Truist Financial Corporation (TFC - Free Report) is slated to report quarterly results on Jul 22. The Zacks Consensus Estimate for TFC’s second-quarter earnings has been unchanged over the past seven days. TFC also carries a Zacks Rank of 3 at present.