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BNY Mellon (BK) Pershing Agrees to Buy Optimal Asset Management

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The Bank of New York Mellon Corporation's BK subsidiary, Pershing, agreed to acquire direct indexing solutions provider, Optimal Asset Management, Inc. The completion of the deal, subject to customary conditions, is expected by the end of this year.

Since the announcement of the agreement, shares of BNY Mellon have lost 1.3%.

Optimal Asset Management has cutting-edge software that provides customizable direct indexing solutions to investors seeking personalized portfolios aligned to their values.

Notably, the acquisition will become part of BNY Mellon Pershing's newly launched business unit, Pershing X. This October, the Pershing X platform was launched within BNY Mellon's Pershing to design and build innovative solutions for the advisory industry.

Pershing X is set to transform the advisory marketplace by helping firms attract new clients, better serve existing clients, and, thus, grow assets under management (AUM). Clients using Pershing X's solutions are likely to benefit from access to enterprise offerings provided by BNY Mellon Wealth Management and Investment Management.

Jim Crowley, Pershing's CEO, stated, "The acquisition of Optimal Asset Management is the latest step in our Pershing X buildout, which aims to fuel growth by helping clients solve the challenge of managing multiple and disconnected technology tools and data sets. As part of our continued efforts to provide clients with innovative offerings, we're delighted to now be able to offer Optimal Asset Management's direct indexing capabilities to our advisory clients within Pershing, as well as to our institutional and retail clients within BNY Mellon's Investment Management business."

Pershing X's president, Ainslie Simmonds, said, "We're thrilled to welcome Optimal Asset Management's founder Dr. Vijay Vaidyanathan and his talented team of software architects to Pershing X. Optimal Asset Management will help advisors at our client firms improve relationships and grow their business."

Vijay Vaidyanathan, the founder and CEO of Optimal Asset Management, commented, "We're excited about joining Pershing X and the possibilities that we can jointly deliver to clients seeking customized direct indexing solutions. We are proud of the reputation we have built at Optimal Asset Management and the industry innovation we've delivered."

Our Take

For BNY Mellon, its largest source of revenues is fee income (constituting more than 80% of total revenues). This July, the company agreed to acquire fund management technology provider Milestone Group in an effort to boost its digital offerings and core capabilities.

BNY Mellon's global expansion initiatives, robust AUM balance and prudent expense-management efforts are expected to continue aiding financials in the near term.

Over the past six months, shares of BNY Mellon have gained 7.8% against a 2.4% decline recorded by the industry.

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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.

Inorganic Growth Efforts by Finance Companies

Several companies from the finance sector are undertaking consolidation efforts to counter the low-interest-rate environment along with the heightened costs of investments in technology.

Last month, CVB Financial Corp. CVBF, the holding company for Citizens Business Bank, announced that Citizens received regulatory approvals from the Federal Deposit Insurance Corporation, and the California Department of Financial Protection and Innovation to complete its previously announced merger agreement with Suncrest Bank. The stock-and-cash deal worth $204 million, announced this July, is expected to close on or about Jan 7, 2022, subject to the satisfaction of all remaining closing conditions.

In an effort to expand its presence, CVBF announced an agreement and plan of reorganization and merger, according to which Suncrest bank would merge with and into Citizens. The acquisition is the second-largest in CVB Financial's history.

Citizens Financial Group, Inc. CFG has completed its previously announced merger with JMP Group LLC. Citizens Financial announced the all-cash deal in September in a bid to augment its capital market capabilities.

The buyout is expected to foster growth, diversify Citizens Financial's capital market platform, and provide greater scale in key verticals like healthcare, technology, financials and real estate.

Likewise, in an effort to broaden its capabilities for institutional investors and investment management clients, SEI Investments Company SEIC acquired a global portfolio intelligence platform company, Novus Partners.

SEI Investments' chairman and CEO, Alfred P. West, Jr., stated, "The financial services landscape is ever-evolving. Our markets continue to face an unprecedented pace of change, and we continuously seek opportunities to stay ahead of and manage this change. By making strategic investments in our solutions and workforce, we drive growth and help our clients make confident decisions for their futures."

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