The Bank of New York Mellon(US:BK) ZACKS·2024-06-20 16:15Core Viewpoint - The Bank of New York Mellon Corporation (BK) is expected to benefit from global expansion efforts, a strong asset management balance, and a solid balance sheet, which will aid revenue growth. The company's business transformation plan is likely to enhance market share [1] Financial Performance - BNY Mellon's net interest revenues (NIR) and net interest margin (NIM) declined in 2020 and 2021 due to low interest rates but rebounded with a five-year compound annual growth rate (CAGR) of 3.8% for NIR by 2023. NIM improved to 1.25% in 2023 from 0.97% in 2022, 0.68% in 2021, and 0.84% in 2020 [2] - Although NIR is expected to decline in 2024, it is projected to grow by 2.1% in 2025 and 6.2% in 2026. NIM is anticipated to be 1.11% in 2024, 1.12% in 2025, and 1.19% in 2026 [2] Capital Distribution - In April 2024, BNY Mellon announced a $6 billion share repurchase program and increased its quarterly cash dividend by 14% to 42 cents per share, indicating a strong capital position and earnings strength [3] - The company is actively pursuing growth initiatives in foreign markets, including service launches, digitization, and strategic acquisitions [3] Expense Management - BNY Mellon's non-interest expenses have a five-year CAGR of 3.3%, with an upward trend continuing into the first quarter of 2024. Although a decline of 5.6% in non-interest expenses is projected for 2024, increases of 2.2% in 2025 and 1.1% in 2026 are expected [4] - Elevated costs are anticipated due to inflationary pressures and technology upgrades, impacting overall expenses in the near term [4] Revenue Composition - Fee income is the largest revenue source for BNY Mellon, constituting 73% of total revenues in the first quarter of 2024, with a five-year CAGR of just 0.1%. The volatility in capital markets raises concerns about the sustainability of this revenue growth [5]