Bank Of New York Mellon's Differentiated Business Mix And NII Growth Signal Upside: Goldman Sachs

The Bank of New York Mellon Corporation BK shares are trading slightly lower on Thursday.

Yesterday, the company reported fourth-quarter 2024 results. The finance behemoth reported fourth-quarter adjusted earnings per share of $1.72 (+33% YoY), beating the street view of $1.56.

Here are some analysts’ take on the stock:

• Goldman Sachs analyst Alexander Blostein reiterated the Buy rating on the stock, raising the price forecast to $96 from $91.
• Keefe, Bruyette & Woods analyst David Konrad maintained the Outperform rating on the stock, with a price forecast of $96.
• Truist Securities analyst David Smith maintained the Buy rating, with a price forecast of $91.

Goldman Sachs: The analyst sees the company’s 2025 and medium-term targets suggest a strong 10%+ EPS growth, not fully reflected in the stock’s 11X 2025 P/E.

Per the analyst, the management team is gaining credibility, which could lead to increased investor confidence and higher valuations.

Blostein writes that key factors supporting the Buy rating include better NII growth, which is 6% higher than consensus due to improved deposit levels, positive fee income growth driven by a differentiated business mix, and continued expense management with 1% – 2% growth expected in 2025.

The analyst sees potential for sustained positive operating leverage and appreciates the growing investor recognition of the fee growth potential. EPS estimates for 2025, 2026, and 2027 have been raised by the analyst to $7.09, $8.15, and $9.26, from $6.79, $7.81, and $8.79 respectively, reflecting higher growth compared to consensus.

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Keefe, Bruyette & Woods: The analyst raised 2025 and 2026 EPS estimates by $0.15 to $6.80 and $0.10 to $7.65, respectively, due to improved deposit behavior and higher NII expectations.

Per Konrad, while deposits are expected to moderate in 2025, the strong results in the second half of 2024 are projected to drive 5% NII growth in 2025.

Despite recent outperformance, the analyst sees a significant upside as the stock is trading in line with peers.

Truist Securities: The outlook for the year is neutral, with fees expected to rise YoY, the analyst writes.

Per Smith, a 5% increase in markets could add ~$70 million in annualized fees.

BNY plans to invest $0.5 billion, double its 2024 investment. The effective tax rate is expected to be 22% – 23%.

The analyst writes, by the first quarter of 2025, over half of the company’s workforce will operate on the platform model, with plans for 85% by year-end.

Price Action: BK shares are trading lower by 0.69% to $81.47 at last check Thursday.

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