BNY Mellon's Cost-Saving Initiatives to Aid Profitability

The Bank of New York Mellon Corporation BK is well poised for bottom-line growth based on its efficient cost-saving initiatives. However, significant dependence on fee-based income as a revenue source remains a concern.

Recently, the Federal Reserve raised interest rates by 25 basis points, which is likely to ease its margin pressure further and aid top-line growth. Notably, management expects net interest revenues to be up 4-6% in 2017.

BNY Mellon’s non-interest expenses have declined over the last three years. The downward trend continued in the first three quarters of 2017 as well. Declining expenses are expected to keep supporting bottom-line growth in the near term.

Moreover, given a solid capital position, the company is expected to continue enhancing shareholder value through efficient capital deployment activities.

However, BNY Mellon’s high dependence on fee-based revenues (more than 79% as of Sep 30, 2017) makes us apprehensive. Such high reliability on fee income could alter the company’s financial position if there is any change in individual investment preferences or a slowdown in capital market activities.

Currently, analysts maintain a neutral stance on BNY Mellon’s earnings growth potential. As a result, its Zacks Consensus Estimate for the current-year earnings has remained stable over the past 30 days.

Shares of the company have gained 14.9% year to date, underperforming industry’s rally of 18.1%.

BNY Mellon carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space are Hancock Holding Company HBHC, Preferred Bank PFBC and FS Bancorp FSBW. All these stocks hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings estimates for Hancock Holding have been revised slightly upward for the current year over the last 60 days. Its share price has increased 17.7% year to date.

Preferred Bank’s earnings estimates have been revised 3.4% upward for the current year over the last 60 days. Its shares have gained more than 18% so far this year.

FS Bancorp’s Zacks Consensus Estimate for current-year earnings has also been revised 2.4% up in the last 60 days. So far this year, its share price has increased nearly 31%.

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Bank Of New York Mellon Corporation (The) (BK) : Free Stock Analysis Report
 
Hancock Holding Company (HBHC) : Free Stock Analysis Report
 
Preferred Bank (PFBC) : Free Stock Analysis Report
 
FS Bancorp, Inc. (FSBW) : Free Stock Analysis Report
 
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