BNY Mellon stock (NYSE: BK) has lost 11% YTD as compared to the 8% rise in the S&P500 index over the same period. Further, at its current price of $40 per share, it is trading approximately 24% below its fair value of $53 – Trefis’ estimate for BNY Mellon’s valuation. The custody banking giant outperformed the street estimates in the first quarter of 2023, with revenues increasing 11% y-o-y to $4.36 billion. It was primarily due to a 62% jump in the net interest income, which benefited from growth in interest-earning assets and a higher net interest margin. Further, the total fee and other income posted a marginal increase. Notably, the Assets under management (AuM) decreased by 16% y-o-y to $1.9 trillion in the quarter, while the Assets under Custody & Administration (AuC/A) rose by 2% to $46.6 trillion. Overall, the net income improved 29% y-o-y to $905 million.
The company’s top line grew 3% y-o-y to $16.4 billion in FY 2022. It was mainly due to growth in the NII driven by higher interest rates and an increase in interest-earning assets. That said, the total fees and other income decreased by 3% y-o-y. Markedly, total fees & other income contribute around 75% of the total revenues. On the cost front, the noninterest expenses as a % of revenues increased from 72% to 79%. Altogether, the adjusted net income decreased 33% y-o-y to $2.36 billion.
Moving forward, we expect the Q2 results to follow the same trend as Q1. All in all, BNY Mellon’s revenues are estimated to touch $17.66 billion in FY2023. Additionally, the adjusted net income margin is likely to improve in the year, leading to an adjusted net income of $3.73 billion. This will likely result in an EPS of $4.81, which coupled with a P/E multiple of just above 11x, will lead to the valuation of $53.
What if you’re looking for a high-performance portfolio with a low downside instead? Here’s a reinforced value portfolio that has beaten the market consistently while limiting losses during periods of sharp market declines.
Invest with Trefis Market Beating Portfolios
See all Trefis Price Estimates
Read the full article here