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Category: Stock Market and Bank of New York Mellon
Date: 17 January 2020 Stock Price: $46.72 We take a look at the 4th quarter earnings report of their 2019 fiscal year of Bank of New York Mellon, a global investment company with over $1.9 trillion in assets under management.
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About Bank of New York Mellon
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries. As of Dec. 31, 2019, BNY Mellon had $37.1 trillion in assets under custody and/or administration, and $1.9 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK).
Overview of Bank of New York Mellon's 4th quarter 2019 earnings report
Data below refers to quarterly data unless specified otherwise:
- Total revenue: $4.778 billion (up from $4.007 billion for the same period of the previous year)
- Total revenue increased by 19% over the last 12 months
- Total noninterest expenses: $2.964 billion (up from $2.987 billion for the same period of the previous year)
- Total noninterest expenses decreased by -1% over the last 12 months
- Net income: $1.391 billion (up 67% from $832 million for the same period of the previous year)
- Diluted earnings per share: $1.52 (up 81% from $0.84 for the same period of the previous year)
- PE ratio of Bank of New York Mellon: 12.13
- Dividend yield of Bank of New York Mellon: 2.7%
- Diluted weighted-average shares outstanding: 914.739 million (down 79% from 988.650 million for the same period of the previous year)
- Book value per share: $42.12 (up 9.03% from $38.63 for the same period of the previous year)
- Cash and cash equivalents: $4.830 billion
- Cash and cash equivalents per share: $5.28
- Cash and cash equivalents makes up 11.3% of Bank of New York Mellon's market capital
- Cash and cash equivalents makes up 1.26% of Bank of New York Mellon's total assets
- Loans net of allowances for losses: $54.831billion
- Loans net of allowances makes up 14.3% of Bank of New York Mellon's total assets
- Goodwill: $17.386 billion
- Goodwill makes up 4.5% of Bank of New York Mellon's total assets
- Goodwill per stock: $19
- Stockholders equity in Bank of New York Mellon: $41.585 billion
- Stockholders equity per share: $45.46
- So Bank of New York Mellon is trading a 1.03 times its stockholders equity which is well outside the expected range of between 2 and 4 which most firms tend to trade at.
Bank of New York Mellon's management commentary on their 4th quarter 2019 earnings report
NEW YORK, January 16, 2020 – The Bank of New York Mellon Corporation (“BNY Mellon”) (NYSE: BK) today reported: Net income applicable to common shareholders (in millions) of $1,391
“In 2019, we continued to build the foundation for growth and the fourth quarter showed progress toward this goal. We recently announced additional partnerships that further our efforts to provide best-in-class services to our clients by opening our platform and combining our capabilities with industry leaders and innovative fintechs. Expenses continued to be well managed as our investments to drive operating efficiencies are bearing fruit. Although we increased our technology spend by nearly 10 percent for the year, overall expenses were down. Additionally, we continue to deliver strong capital returns to shareholders, returning $4.4 billion in 2019 through share buybacks and dividends. In 2020, we plan to continue investing in technology to further enhance service quality, launch new capabilities, drive additional efficiencies and improve resiliency,” Todd Gibbons, interim Chief Executive Officer, said.
“In 2019, we continued to build the foundation for growth and the fourth quarter showed progress toward this goal. We recently announced additional partnerships that further our efforts to provide best-in-class services to our clients by opening our platform and combining our capabilities with industry leaders and innovative fintechs. Expenses continued to be well managed as our investments to drive operating efficiencies are bearing fruit. Although we increased our technology spend by nearly 10 percent for the year, overall expenses were down. Additionally, we continue to deliver strong capital returns to shareholders, returning $4.4 billion in 2019 through share buybacks and dividends. In 2020, we plan to continue investing in technology to further enhance service quality, launch new capabilities, drive additional efficiencies and improve resiliency,” Todd Gibbons, interim Chief Executive Officer, said.
“We are also pleased to see that the efforts to drive operating excellence are not only reducing costs, but enhancing quality, as measured by many of our clients. This helped deliver fee growth in many of the services businesses. Although we continue to be negatively impacted by lower rates, a flat yield curve and low foreign exchange volatility, we remain intensely focused on carefully managing costs and driving organic revenue growth,” Mr. Gibbons concluded.
Other highlights:
Other highlights:
- Assets under management (AUM) of $1.9 trillion, increased 11%, primarily reflecting higher market values and the favorable impact of a weaker U.S. dollar (principally versus the British pound), partially offset by net outflows.
- Repurchased 22.2 million common shares for $1.04 billion and paid $286 million in dividends to common shareholders.
Bank of New York Mellon (NYSE: BK) stock price history
The image below, obtained from Google, shows the stock price history of Bank of New York Mellon over the last 5 years. And it's been an average time for Bank of New York Mellon stockholders. 5 years ago the stock was trading at around $36.90 a stock and its currently trading at $46.72 a stock. That's a return of 26.6% provided to Bank of New York Mellon stockholders over the last 5 years.
The stock of Bank of New York Mellon s trading at closer to its 52 week low of $40.52 than it is to its 52 week high of $54.27 which to us is a clear indication that the short term sentiment and momentum of Bank of New York Mellon's stock is negative
The stock of Bank of New York Mellon s trading at closer to its 52 week low of $40.52 than it is to its 52 week high of $54.27 which to us is a clear indication that the short term sentiment and momentum of Bank of New York Mellon's stock is negative
Recent coverage of Bank of New York Mellon
The extract below discusses the latest regarding Bank of New York Mellon as obtained from WSJ.com
Bank of New York Mellon Corp. executives on Thursday warned investors that its expenses may rise more than expected this year, sending shares of the bank down nearly 8%. The forecast overshadowed BNY Mellon’s fourth-quarter results, which beat analysts’ expectations for profits. On a conference call with analysts, BNY Mellon signaled that costs could rise by as much as 2% in 2020. The forecast disappointed investors who hoped cost-cutting would do more to offset continuing technology investments, leading some to question whether BNY will meet earnings estimates for 2020.
Analysts expect the company to earn $4.30 a share this year, according to estimates polled by S&P Global Market Intelligence. “Everyone thought they went through a period of investment and were able to remain disciplined,” said UBS analyst Brennan Hawken. “The reason why the 2% [in expense growth] is a disappointment is because the estimates reflected that. The earnings were fine; the outlook was disappointing.” BNY Mellon’s shares fell $3.97, or 7.8%, to $46.72 in early afternoon trading.
On the call, BNY Mellon’s interim chief executive Todd Gibbons said the custody bank’s priorities were “unchanged.” The bank continues to focus on automating operations, lowering expenses and finding new business opportunities to lift revenue, according to Mr. Gibbons. “Maintaining our investment in technology is key to this” strategy, said Mr. Gibbons. “Our overall technology spend for 2020 is expected to exceed the $3 billion we spent in 2019.”
Read the full article here
Bank of New York Mellon Corp. executives on Thursday warned investors that its expenses may rise more than expected this year, sending shares of the bank down nearly 8%. The forecast overshadowed BNY Mellon’s fourth-quarter results, which beat analysts’ expectations for profits. On a conference call with analysts, BNY Mellon signaled that costs could rise by as much as 2% in 2020. The forecast disappointed investors who hoped cost-cutting would do more to offset continuing technology investments, leading some to question whether BNY will meet earnings estimates for 2020.
Analysts expect the company to earn $4.30 a share this year, according to estimates polled by S&P Global Market Intelligence. “Everyone thought they went through a period of investment and were able to remain disciplined,” said UBS analyst Brennan Hawken. “The reason why the 2% [in expense growth] is a disappointment is because the estimates reflected that. The earnings were fine; the outlook was disappointing.” BNY Mellon’s shares fell $3.97, or 7.8%, to $46.72 in early afternoon trading.
On the call, BNY Mellon’s interim chief executive Todd Gibbons said the custody bank’s priorities were “unchanged.” The bank continues to focus on automating operations, lowering expenses and finding new business opportunities to lift revenue, according to Mr. Gibbons. “Maintaining our investment in technology is key to this” strategy, said Mr. Gibbons. “Our overall technology spend for 2020 is expected to exceed the $3 billion we spent in 2019.”
Read the full article here
Bank of New York Mellon (NYSE: BK) latest stock valuation
So what is Bank of New York Mellon stock worth based on the release of their 4th quarter 2019 and full fiscal 2019 earnings earnings report? Based on Bank of New York Mellon's latest earnings report our valuation models provide a target (full value) price for Morgan Stanley stock at $52.90 a stock. We therefore believe that the stock of Bank of New York Mellon is undervalued at its current price of $46.72
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $52.90. Therefore we believe a good entry point into Bank of New York Mellon stock is at $47.61 or below. Since the stock of Bank of New York Mellon is trading at below our suggested entry point we rate the stock of Bank of New York Mellon as a buy.
We believe the market has reacted harshly to their financial results and we expect it to recover and climb to levels closer to our target price (full value price) in coming weeks and months.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $52.90. Therefore we believe a good entry point into Bank of New York Mellon stock is at $47.61 or below. Since the stock of Bank of New York Mellon is trading at below our suggested entry point we rate the stock of Bank of New York Mellon as a buy.
We believe the market has reacted harshly to their financial results and we expect it to recover and climb to levels closer to our target price (full value price) in coming weeks and months.
Next earnings release date for Bank of New York Mellon
It is expected that Bank of New York Mellon (NYSE: BK) 1st quarter 2020 earnings report will be released in the middle of April 2020