On Monday, Goldman Sachs (NYSE:GS) updated its outlook on Bank of New York Mellon (NYSE:BK) shares, increasing the price target to $74 from the previous $66 while maintaining a Buy rating. The revision follows Bank of New York Mellon's second-quarter earnings for 2024, which surpassed expectations.
The firm's recent performance highlighted effective management strategies that have improved fee growth and profitability. The analyst pointed to the bank's commitment to controlling expenses and achieving positive operating leverage, with flat year-over-year expense growth in 2024 and a target for pre-tax margins to exceed 33%, up from 30% in 2023.
Bank of New York Mellon has shown promising signs of organic fee growth, particularly in its Pershing, Treasury Services, and Clearance/Collateral Management divisions. The firm's pledge to maintain a payout of over 100% into 2024 also contributes to the positive outlook.
Despite expectations of a decline in Non-Interest Bearing (Non-IB) deposits in the third quarter that may slightly impact Net Interest Income (NII), the bank is anticipated to find some balance through organic Interest Bearing (IB) deposits and growth in its loans and securities portfolios. Deposit trends have remained more resilient than expected in the first half of 2024, and there are forward-looking tailwinds that could bolster NII.
Goldman Sachs has adjusted its earnings per share (EPS) estimates for Bank of New York Mellon to $5.80 for 2024, $6.39 for 2025, and $7.13 for 2026, up from previous estimates of $5.76, $6.28, and $6.88, respectively. These revised figures represent a mid-single-digit increase compared to the consensus. The new 12-month price target of $74 implies a 14% potential upside for the bank's stock.
In other recent news, Bank of New York Mellon (BNY Mellon) has demonstrated 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. Additionally, 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.
Evercore ISI has subsequently revised its price target for BNY Mellon to $66, maintaining an In Line rating. This revision follows robust financial results and the anticipation of a better-than-expected net interest income for the year, despite a conservative forecast of a 10% decline.
BNY Mellon's strategic initiatives, including its focus on security services and the expansion of its wealth advisory platform, Wove, have been instrumental in this 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, which continues to prioritize strategic growth and shareholder returns.
InvestingPro Insights
Bank of New York Mellon's (NYSE:BK) recent performance has caught the attention of investors and analysts alike. In light of Goldman Sachs' updated outlook, several metrics from InvestingPro provide additional context to the bank's financial health and stock potential. With a market capitalization of $47.74 billion and a P/E ratio standing at 15.52, the bank demonstrates a solid valuation framework. Notably, the P/E ratio adjusted for the last twelve months as of Q2 2024 is even more attractive at 12.11, suggesting a potentially undervalued stock relative to near-term earnings growth.
InvestingPro Tips highlight that Bank of New York Mellon has a track record of consistent dividend growth, having raised its dividend for 13 consecutive years. This commitment to returning value to shareholders is further evidenced by the impressive 27.03% dividend growth over the last twelve months as of Q2 2024. Moreover, analysts have revised their earnings upwards for the upcoming period, reflecting confidence in the bank's future performance.
The bank's stock has also shown robust returns, with a 57.42% return over the last year and an 8.65% return over the last week. These returns are indicative of the bank's strong market presence and investor optimism. For readers interested in gaining more insights, there are additional InvestingPro Tips available, which can be accessed with a special offer. Use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and discover what other valuable tips InvestingPro has to offer for Bank of New York Mellon.
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