On Monday, Keefe, Bruyette & Woods adjusted its outlook on shares of Bank of New York Mellon (NYSE:BK), increasing the price target to $75 from $70 and maintaining an Outperform rating. The revision follows BNY's strong second-quarter performance, which surpassed expectations in net interest income (NII), core fees, and core expenses, and achieved a 33% pre-tax margin.
The bank's management has reiterated its guidance for a 10% decrease in NII due to anticipated lower results in the third quarter. Still, they remain cautiously optimistic about the latter half of the year and are focused on delivering positive operating leverage. On the day of the announcement, BNY Mellon's shares saw a significant uptick, climbing 5.24%, which notably outperformed the Bank Index (BKX) by 5.49%.
The financial institution's anticipated return on tangible common equity (ROTCE) is expected to be in the low-20% range, having reported 24.4% in the second quarter.
Despite this strong performance, BNY Mellon's valuation is trading at 10.3 times its projected 2025 earnings, which is a 10% discount compared to its Global Systemically Important Banks (G-SIB) peers that have an average ROTCE of 14.4%. According to Keefe, Bruyette & Woods, this positions BNY Mellon with the most attractive valuation relative to its peers.
The firm's outlook is underpinned by the recent earnings report and the bank's operational strategy, which seems to be resonating positively with the market, as reflected in the stock's performance. The price target increase is indicative of the confidence in BNY Mellon's trajectory and potential for continued growth.
In other recent news, Bank of New York Mellon (BNY Mellon) has demonstrated a strong financial performance in the first half of 2024. The company's second quarter earnings report highlighted a significant 16% year-over-year increase in earnings per share, reaching $1.52. Moreover, total revenue rose 2% year-over-year to $4.6 billion, a result of a 5% boost in investment services fees and a 16% increase in foreign exchange revenue.
Following these results, Deutsche Bank (ETR:DBKGn) raised its price target on BNY Mellon shares to $63, Citi downgraded the stock to Neutral with a price target of $65, and Goldman Sachs (NYSE:GS) increased its price target to $74, all while maintaining their respective ratings. Evercore ISI also revised its price target for BNY Mellon to $66, maintaining an In Line rating.
These adjustments from major firms come after BNY Mellon's strategic initiatives, including its focus on security services and the expansion of its wealth advisory platform, Wove, which have been instrumental in the company's performance.
The company returned over $900 million of capital to shareholders, reflecting its commitment to shareholder returns. These are among the recent developments at BNY Mellon as it continues to prioritize strategic growth and shareholder returns.
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