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On Friday, Wolfe Research adjusted its stance on Bank of New York Mellon (NYSE:BK), downgrading the stock from Outperform to Peerperform. The firm's analysts cited the stock's current valuation as the primary reason for the change, noting that Bank of New York Mellon's shares have seen significant growth, with a remarkable 53.79% return over the past year and strong earnings per share (EPS) momentum. According to InvestingPro data, the stock currently trades at a P/E ratio of 17.42x, with analyst price targets ranging from $70 to $96.
Despite the downgrade, Wolfe Research continues to view Bank of New York Mellon favorably, especially highlighting the Market and Wealth Services segment, with Pershing receiving particular praise. The analysts acknowledged the bank's exceptional management performance, which has led to robust share outperformance and top-tier EPS growth. InvestingPro data reveals the company's strong dividend profile, having maintained payments for 54 consecutive years with 14 years of consecutive raises, demonstrating consistent shareholder returns.
The firm believes that while Bank of New York Mellon has executed its strategy well, leading to organic growth, interest income resilience, and effective capital and expense management, the current share price is approaching the lower bound of their fair value (FV) range of $80-$90. This range is based on an 11-12x target price-to-earnings (P/E) ratio on projected EPS of $7-$7.50 in approximately 2026.
Wolfe Research's analysts pointed out that Bank of New York Mellon's defensive nature might make it less attractive in a market that could favor more cyclical names. Additionally, they expressed concerns about the bank's net interest income (NII) profile in a potential environment of sustained higher interest rates, which contributed to their decision to adopt a more neutral position on the stock.
In other recent news, The Bank of New York Mellon Corp reported a notable 22% year-over-year increase in earnings per share, reaching $1.50, and a 5% growth in total revenue, amounting to $4.6 billion. The bank has also issued $750 million in aggregate principal amount of 5.225% Fixed Rate / Floating Rate Callable Senior Medium-Term Notes Series J, due in 2035, as part of its broader capital and liquidity management strategy.
In addition, BNY Mellon completed its acquisition of Archer Holdco, LLC, a technology-driven managed account solutions provider, expected to enhance its service offerings. The company also announced the appointment of Rajashree Datta as its new Deputy Chief Risk Officer, underlining its commitment to robust risk management practices.
Several analyst firms, including Morgan Stanley (NYSE:MS), Deutsche Bank (ETR:DBKGn), Barclays (LON:BARC), and Citi, have adjusted their price targets for BNY Mellon in light of its strong financial performance. BNY Mellon's management revised their Net Interest Income (NII) forecast for 2024 upwards, predicting a 5% year-over-year decrease. The bank is also expected to achieve positive operating leverage in 2025, benefiting from strong fee performance and a commitment to controlling expenses.
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