Bank of New York Mellon (NYSE: BK) reported mixed Q1 results, modestly exceeding earnings expectations but missing revenue estimates.
Following the results, shares of the American investment banking services holding company were down 2.3% to close at $46.21.
Q1 Performance
The bank reported earnings of $0.86 per share, which declined 11% year-over-year but was a cent ahead of analysts’ estimates of $0.85 per share. The company reported earnings of $0.97 per share for the prior-year period.
Meanwhile, revenues remained flat year-over-year at $3.9 billion and lagged consensus estimates of $3.97 billion. The decrease in revenues reflected a 3% decline in Fee revenue due to Russia-related accelerated amortization of deferred costs for depositary receipts services.
On the positive side, assets under management (AUM) increased 2% to $2.3 trillion while assets under custody (AUC) grew 9% to $45.5 trillion, driven by client inflows, net new business, and higher market values, and partially offset by a stronger dollar.
The provision for credit losses was $2 million, versus a benefit of $83 million for the prior-year quarter.
Total non-interest expense increased 5.5% to $3.0 billion due to higher investments in growth, infrastructure, and efficiency initiatives and higher revenue-related expenses, partially offset by a stronger U.S. dollar.
CEO Comments
Bank of New York Mellon CEO, Todd Gibbons, commented, “Throughout the quarter, we took actions in the investment securities portfolio to temper the immediate impact to capital from higher interest rates. And we expect higher interest rates to be a positive for both fee and net interest revenue going forward.”
Wall Street’s Take
Following the lackluster results, UBS analyst Brennan Hawken decreased the price target on Bank of New York Mellon to $58 (25.51% upside potential) from $61 and reiterated a Buy rating.
Overall, the stock has a Moderate Buy consensus rating based on six Buys and nine Holds. At the time of writing, the average BNY Mellon price target of $58.14 implies 25.22% upside potential to current levels.
Investors Weigh In
Notably, TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on BNY Mellon, with 23.2% of investors increasing their exposure to BK stock over the past 30 days.
Conclusion
The lacklustre results can be attributed to the ongoing uncertain environment, including the war in Ukraine, volatile markets, and rising inflation. However, a strong balance sheet combined with healthy underlying business momentum will help the bank sail through these tough times.
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