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BofA lifts Bank of New York Mellon share price target, buoyed by strong Q1 earnings

EditorEmilio Ghigini
Published 17/04/2024, 08:10 pm
© Reuters.
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On Wednesday, BofA Securities updated its analysis of the Bank of New York Mellon (NYSE:BK), raising share price target from $64.00 to $66.00, while reiterating a Buy rating on the stock.

The adjustment comes after BNY Mellon reported first-quarter earnings that surpassed both BofA Securities' and consensus estimates. The bank achieved a core EPS of $1.29, which is higher than the expected $1.21 and $1.18 from BofA Securities and consensus forecasts, respectively.

The better-than-expected performance was attributed to an increase in fees, which were up 2.8% and 3.7% against BofA Securities' and consensus estimates. Additionally, net interest income saw a rise of 2.9% and 1.7% compared to the same benchmarks. The firm noted that the bank's expenses were generally in line with predictions, showing a slight increase of 0.2% and a marginal decrease of 0.5% as expected by BofA Securities and consensus.

However, credit costs were higher than anticipated, coming in at $27 million compared to the $10 million and $8.9 million forecasted by BofA Securities and consensus. This increase in credit costs was primarily due to provisioning related to commercial real estate.

Despite this, management at BNY Mellon reiterated their full-year 2024 guidance, which includes a 10% year-over-year decline in net interest income, a flat core expense trajectory, and a commitment to a capital return exceeding 100%.

The price objective was influenced by minor adjustments to the earnings per share forecast for BNY Mellon. BofA Securities has maintained a valuation approach that equally weights its 2024 estimated earnings per share and the 2024 estimated tangible book value for the bank.

InvestingPro Insights

Following the positive earnings report and the updated price target from BofA Securities, investors may find additional context in the latest data and analysis from InvestingPro. The Bank of New York Mellon's (NYSE:BK) management has demonstrated confidence in the company's financial health through an aggressive share buyback strategy and a consistent history of raising its dividend for 13 consecutive years. These actions are supported by a robust track record of dividend payments maintained over an impressive 54-year span.

From a valuation standpoint, BNY Mellon is trading at an attractive P/E ratio of 13.85, with an adjusted P/E ratio for the last twelve months as of Q4 2023 down to 10.73. This indicates a potential undervaluation relative to near-term earnings growth, considering the PEG ratio stands at a mere 0.4 for the same period. Additionally, the stock has experienced a significant price uptick over the last six months, with a 33.62% total return, hinting at strong investor confidence.

Investors seeking further analysis and data can explore additional InvestingPro Tips specific to BNY Mellon, with a total of 9 tips available to guide investment decisions. To access these insights and enhance your investment strategy, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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