BK Stock Up on Q1 Earnings & Revenue Beat, Provisions Fall Y/Y

The Bank of New York Mellon Corporation’s BK first-quarter 2025 adjusted earnings of $1.58 per share surpassed the Zacks Consensus Estimate of $1.49. Also, the bottom line reflected a jump of 22.5% from the prior-year quarter.

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BK shares gained 2.5% in the pre-market trading session on better-than-expected results.

Results were primarily aided by a rise in fee revenues and net interest income (NII) alongside lower provisions. Assets under custody and/or administration (AUC/A) balance grew on higher inflows. However, higher expenses and lower assets under management (AUM) balances were undermining factors.

The results excluded certain non-recurring items. Considering those, net income applicable to common shareholders (GAAP basis) was $1.15 billion, up from $953 million in the year-ago quarter. We had projected a net income applicable to common shareholders of $920.2 million.

BK’s Revenues Increase, Expenses Rise

Total revenues in the first quarter increased 5.9% year over year to $4.79 billion. The top line surpassed the Zacks Consensus Estimate of $4.74 billion.

NII was $1.16 billion, up 11.4% year over year. The rise reflected higher reinvestment yields on maturing securities, partly offset by changes in the deposit mix. Our estimate for the metric was $1.08 billion.

Net interest margin (NIM) expanded 11 basis points (bps) to 1.30%. Our estimate for NIM was 1.23%.

Total fee and other revenues increased 4.2% year over year to $3.63 billion. The rise was primarily driven by an increase in all the components except investment management and performance fees and distribution and servicing fees. Our estimate for the same was $3.60 billion.

Total non-interest expenses (GAAP basis) were $3.25 billion, up 2.4% from the prior-year quarter. The rise was driven by almost all the components except staff expenses, distribution and servicing costs, and amortization of intangible assets. We had projected non-interest expenses of $3.38 billion.

BNY Mellon’s Asset Balances – Mixed Bag

As of March 31, 2025, AUM was $2.01 trillion, down marginally year over year. The fall reflected higher cumulative net outflows, partially offset by higher market values. Our estimate for AUM was $2.16 trillion.

AUC/A of $53.1 trillion increased 8.8% year over year, primarily reflecting higher market values, client inflows and net new business.

BK’s Credit Quality Improves

The allowance for loan losses, as a percentage of total loans, was 0.41%, down 3 bps from the prior-year quarter. As of March 31, 2025, non-performing assets were $213 million, down from $278 million in the year-ago quarter.

In the reported quarter, the company recorded $18 million of provision for credit losses. In the prior-year quarter, provisions were $27 million. We had expected the metric to be $17.6 million.

BNY Mellon Capital Position Improves

As of March 31, 2025, the common equity Tier 1 ratio was 11.5%, up from 10.8% as of March 31, 2024. Tier 1 leverage ratio was 6.2%, up from 5.9% as of March 31, 2024.

BK’s Share Repurchase Update

During the reported quarter, BNY Mellon repurchased shares worth $746 million.

Our Take on BNY Mellon

Relatively higher interest rates, BK’s global expansion efforts and a strong balance sheet position are likely to keep supporting its top-line growth. Also, robust AUM balance is another positive. However, concentration risk due to the company’s higher dependence on fee-based revenues, higher funding costs and elevated expenses are worrisome.

The Bank of New York Mellon Corporation Price, Consensus and EPS Surprise

The Bank of New York Mellon Corporation price-consensus-eps-surprise-chart | The Bank of New York Mellon Corporation Quote

Currently, BNY Mellon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Dates of Other Major Banks

BankUnited, Inc. BKU is scheduled to report quarterly results on April 28. The Zacks Consensus Estimate for BKU’s first-quarter earnings has been unchanged over the past seven days.
 
Truist Financial Corporation TFC is slated to report quarterly results on April 17. The Zacks Consensus Estimate for TFC’s first-quarter earnings has been revised 1.1% downward over the past seven days.

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This article originally published on Zacks Investment Research (zacks.com).

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