BNY Mellon Initiates GFI Group - Analyst Blog

On Tuesday, Bank of New York Mellon Corporation (BK) announced that its asset servicing segment has initiated a new Global Financial Institutions (GFI) group. The group has been formed with an aim to carter the future growth plans and requirements of the clients in banking, insurance and mutual fund sectors.

The formation of GFI group is in concurrence with BNY Mellon’s just completed acquisition of Global Investment Servicing business from PNC Financial Services Group Inc. (PNC) and the anticipated acquisition of BHF Asset Servicing in Germany. The company will likely boost its position as a premier associate to its financial institution clients who seek to take full advantage of the escalating global recovery.

GFI group will be headed by Ms. Nadine Chakar, who was formerly the head of Europe, Middle East and Africa (EMEA) Asset Servicing.

Mr. Steve Wynne, who was previously the CEO of PNC Global Investment Servicing, has been named as CEO of the newly formed GFI group. Similarly, Ms. Nancy Wolcott, previously the President of PNC Global Investment Servicing, has been nominated as the President of U.S. Funds Services of the group. Mr. Lou Maiuri, presently Global Head of Outsourcing at BNY Mellon Asset Servicing and Chairman of Eagle Investment Solutions, will also take on the role of Head of U.S. Financial Institutions (which consists of investment managers, insurance companies and banks) in GFI group.

BNY Mellon also declared that Mr. Frank Froud who was formerly Head of Client Management for the United States at BNY Mellon, will now take the position of Head of EMEA Asset Servicing, replacing Ms. Chakar.

With completion of the acquisition of Global Investment Servicing, BNY Mellon’s European asset base has doubled. The company is now the second largest provider of administration, transfer agency and fund accounting services to the fund managers globally. The company expects to complete the acquisition of BHF Asset Servicing by August 2010, which will make it the second largest asset servicer in Germany.

BNY Mellon has recognized a number of international markets such as Australia, Germany, China, India, South Korea, Brazil and the Middle East where it is looking forward to expand its asset servicing business over the next two years. The company will likely proceed with many more acquisitions to expand its footprint in these regions.

Last month, BNY Mellon launched a new company, BNY Mellon Clearing, LLC, to clear futures and derivatives trades on behalf of clients.

BNY Mellon benefits considerably from its partnership with on-the-ground institutions and leverages their local presence with its global capabilities. Given the huge growth potential of the overseas securities markets and the rise in complex new securities, the long-term growth prospects for the industry are encouraging. We are of the opinion that the creation of GIF group and the recent acquisition will enable the company to grab upcoming opportunities in the near future.

Though BNY Mellon enjoys a position to benefit from the growth of global financial assets, we expect interest-bearing deposit costs to rise faster than asset yields due to mounting competitive pressure. This would negatively impact net interest margin and net interest income. This justifies BNY Mellon’s current Zacks #3 Rank (Hold), implying that the stock is expected to perform in line with the broader U.S. equity market over the next one to three months. We recommend a Neutral rating on the stock.
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