Bank Of New York Mellon's Differentiated Business Mix And NII Growth Signal Upside: Goldman Sachs

Core Viewpoint - The Bank of New York Mellon Corporation reported strong fourth-quarter 2024 results, with adjusted earnings per share of $1.72, reflecting a 33% year-over-year increase, surpassing analyst expectations of $1.56 [1] Analyst Insights - Goldman Sachs projects a robust 10%+ EPS growth for 2025 and the medium term, which is not fully reflected in the stock's current 11X 2025 P/E ratio [1] - The management team is gaining credibility, potentially leading to increased investor confidence and higher valuations [2] - Key factors supporting the Buy rating include better net interest income (NII) growth, which is 6% higher than consensus due to improved deposit levels, and positive fee income growth driven by a differentiated business mix [2] - Continued expense management is expected, with a 1% – 2% growth forecasted for 2025 [2] Earnings Estimates - EPS estimates for 2025, 2026, and 2027 have been raised to $7.09, $8.15, and $9.26, respectively, indicating higher growth compared to consensus [3] - Keefe, Bruyette & Woods raised 2025 and 2026 EPS estimates by $0.15 to $6.80 and $0.10 to $7.65, respectively, due to improved deposit behavior and higher NII expectations [4] Market Outlook - Despite recent outperformance, there is significant upside potential as the stock is trading in line with peers [5] - Truist Securities anticipates a neutral outlook for the year, with fees expected to rise year-over-year [5] - A 5% increase in markets could add approximately $70 million in annualized fees [5] Strategic Initiatives - BNY plans to invest $0.5 billion, doubling its 2024 investment [5] - By the first quarter of 2025, over half of the company's workforce will operate on the platform model, with plans for 85% by year-end [6] Price Action - BK shares are currently trading lower by 0.69% at $81.47 [6] - Analysts have set price forecasts for the stock, with Goldman Sachs and Keefe, Bruyette & Woods both at $96, while Truist Securities maintains a forecast of $91 [8]