Bank of New York Mellon Corporation (NYSE: BK) is a global investment firm dedicated to assisting customers with the management and servicing of their financial assets throughout the investment lifecycle. It offers financial services to individuals, companies, and organizations. Securities Services, Market and Wealth Services, and Investment and Wealth Management are the company's segments. Asset servicing, global custody, fund accounting, integrated middle-office solutions, transfer agency, and data and analytics solutions are all part of the Securities Services category. Pershing, clearing, and collateral management, and its scaled treasury services division are all part of the Market and Wealth Services sector. Its investment management and wealth management businesses are included in the Investment and Wealth Management sector. It has USD 46.7 trillion in assets under management and USD 2.4 trillion in assets under management.
Key takeaways from Q1 FY22
Other Key events of Q1 FY22
Balance Sheet & Liquidity Position
Source: Company filing
Top 10 shareholders
The top 10 shareholders together form around 42.63% of the total shareholding, while the top 4 constitute the maximum holding. Berkshire Hathaway Inc. and The Vanguard Group, Inc. hold the maximum stake in the company at 8.96% and 8.07%, respectively, as also highlighted in the chart below:
Source: REFINITIV, Analysis by Kalkine Group
Outlook for Q2 FY 2022
With the current macroeconomic scenarios and rapidly evolving monetary policies, the company expects the current year NIR to up by roughly 13% compared to 2021, assuming the correlation between the rates and deposit runs-offs to remain consistent which has been seen in the past. The company expects revenue to be up 4%-5%, including a tailwind of about 5% from the reduction in key waivers and a 1%-2% headwind from the Russian-Ukraine war, currency, and other factors. For expenses, the corporation expects an increase of approximately 5%, slightly lower than the previous estimates. Further hedges have been taken for the portfolio to mitigate the impact of higher rates and credit spreads.
Valuation Methodology: Price/Book Value Multiple Based Relative Valuation
(Analysis by Kalkine Group)
* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
With the crisis in Ukraine, unpredictable markets, and continuously rising inflation, we are in a more unstable climate that will necessitate more significant monetary policy adjustments. In times like these, BK's robust, lower-risk balance sheet, as well as the durability of its business model, set it apart from its competitors.
BK share has corrected over the past six months, down 19.55%. The stock is currently leaning towards the lower end of its 52-week range of USD 41.77 to USD 64.63. As can be seen in the price chart below, the price is currently taking resistance from the short-term (50-day) SMA. The price has broken the bottom consolidation and has moved upwards, and it is predicted that after the retest the price will continue its upward movement towards our target levels. We have valued the stock using the Price/ Book Value Per Share multiple-based relative valuation method and arrived at a target price of USD 55.53.
Considering the strong fundamentals, robust AUM and AUC, positive outlook, associated risks, and current valuation,we give a "Buy" recommendation on the stock at the closing price ofUSD 45.34, as of June 08, 2022.
1-Year Technical Price Chart (as of June 08, 2022) Source: REFINITIV, Analysis by Kalkine Group
Technical Levels Summary
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Note 1:The reference data in this report has been partly sourced from REFINITIV.
Note2:Investmentdecision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.
Note 3: The report publishing date is as per the Pacific Time Zone.
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