BNY Mellon Closes BHF Acquisition - Analyst Blog

The Bank of New York Mellon Corp. (BK) said on Monday that it has completed its previously announced acquisition of Germany's BHF Asset Servicing GmbH for EUR253 million (US$330 million). This is a part of BNY Mellon’s initiative to expand its global market share. This acquisition allows the company to make a big-bang entry into the German banking market.
 
The transaction, which makes BNY Mellon the second largest organization in fund administration in Germany, is expected to be accretive to BNY Mellon’s earnings within a year.
 
BNY Mellon bought the business from BHF-Bank Aktiengesellschaft and Sal. Oppenheim jr. & Cie SCA, of Frankfurt, Germany under the transaction that was originally announced on March 8, 2010. The transaction also includes Frankfurter Service Kapitalanlage-Gesselschaft mbH, BHF Asset Servicing’s fund administration affiliate.
 
With this acquisition, BNY Mellon's combined German business now holds EUR569 billion (US$744 billion) in assets under custody and administration and EUR122 billion (US$159 billion) depotbanking volume.
 
In February 2010, BNY Mellon acquired PNC Financial Services Group's (PNC) investment services division for about $2.3 billion. This acquisition increased BNY Mellon's assets under administration by $855 billion.
 
BNY Mellon has been operating in Germany since 1931. Along with asset servicing, asset management and depotbanking, the company provides corporate trust, treasury services, depository receipts and client management services in Germany. The recent acquisition significantly enhances BNY Mellon’s presence in Germany.
 
The BNY Mellon Corporation was incorporated on Jul 1, 2007, following the merger of The Bank of New York Company, Inc. and Mellon Financial Corporation. The New York-based financial services company provides various products and services to individuals and institutions in more than 100 markets worldwide.
 
BNY Mellon’s second-quarter earnings from continuing operations of 55 cents per share were in line with the Zacks Consensus Estimate. This also compares favorably with earnings of 23 cents in the year-ago quarter.
 
The company experienced a year-over-year increase in assets under custody and administration during the reported quarter. Increased securities servicing fees, improved credit quality and continued long-term asset inflows in its asset and wealth management businesses were also among the positives. However, higher non-interest expenses were the downside.
 
Though BNY Mellon is well positioned to benefit from the growth of global financial assets, supported by expense management, modernization of public pension schemes and growth in cross-border investing, we expect costs of raising interest-bearing deposits to rise faster than asset yields due to competitive pressure, thereby negatively impacting net interest margin as well as net interest income.
 


BNY Mellon currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Also, in the absence of any significant positive or negative catalysts, we maintain a long-term “Neutral” recommendation on the stock.
 

 
BANK OF NY MELL (BK): Free Stock Analysis Report
 
PNC FINL SVC CP (PNC): Free Stock Analysis Report
 
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