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Why You Should Hang On to Bank of New York Mellon (BK)

Zacks Equity Research

Banks continue to remain on investors’ radar with expectations of fewer regulations under the Trump administration and faster rate hike. There are several major regional banks that have the potential to perform well in the future.

One such bank is The Bank of New York Mellon Corporation BK.  Efficient cost saving initiatives, strong global presence and easing margin pressure position the company well for future growth. However, various concerns like dependence on fee-based income and the adverse impact of various regulatory restrictions make us a little apprehensive.

For the current year the banks’ earnings estimates were revised 0.6% downward over the last 60 days. Over the last six months, the stock gained 18.1%, underperforming the 31.1% gain for the Zacks categorized Banks - Major Regional industry.  

The company carries a Zacks Rank #3 (Hold).

The company’s cost saving initiatives has been driving its bottom line. Notably, the company’s non-interest expenses have declined at a CAGR of 7% over the last three years (2014-2016). Despite the adverse impact of regulations and investment related expenses, the company remains well positioned to lower its overall cost.

The company’s net interest revenue (NIR) has grown at a three-year (2014-2016) CAGR of 4.4%. Further, the company’s net interest margin pressure has been gradually easing backed by an economic recovery and improving interest rate environment.  

Moreover, the company is well positioned to grow through acquisitions given its strong liquidity position. However, the company’s huge dependence on fee-based income is a key concern.

Stocks to Consider

You may consider some better-ranked stocks from the same space – such as Comerica Inc. CMA, Bank of America Corp. BAC and SunTrust Banks, Inc. STI. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Comerica witnessed an upward earnings estimate revision of 1.7% for the current year in the last 60 days. Its share price increased 80.1% in the last one year.

Bank of America witnessed an upward earnings estimate revision of 1.2% for the current year in the last 60 days. The company’s share price increased 74.6% in the last one year.

SunTrust Banks’ earnings estimates were revised 0.3% for the current year in the last 60 days. Its share price increased nearly 51.5% in the last one year.

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Comerica Incorporated (CMA): Free Stock Analysis Report
SunTrust Banks, Inc. (STI): Free Stock Analysis Report
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Bank of America Corporation (BAC): Free Stock Analysis Report
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