BNY Mellon Earnings: Continued Strong Operating Leverage; Little Said on Potential Large Acquisition

Key Morningstar Metrics for Bank of New York Mellon

• Fair Value Estimate: $85.00
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Low

What We Thought of Bank of New York Mellon’s Earnings

Bank of New York Mellon BK reported 9% revenue growth and 4% expense growth, resulting in 20% pretax income growth. The firm raised its net interest income outlook for 2025 to high-single-digit growth from mid-single-digit growth, but it also raised its expense outlook to about 3% from a range of 1%-2%.

Why it matters: BNY Mellon’s results were strong, in our view. With revenue growth continuing to eclipse expense growth, the firm is generating good operating leverage.

• Net interest income is typically more volatile than fee revenue, and it is coming in above our expectations. We think average deposit levels—which were up 6% sequentially and 4% from last year—were healthy.
• Management commentary suggested that the pricing environment, historically a headwind for the company, is currently roughly flat.

The bottom line: We are maintaining our wide moat rating as we increase our near-term fee and net interest revenue forecasts. We are increasing our fair value estimate to $85 per share from $80.

• Following a Wall Street Journal report that BNY Mellon approached Northern Trust NTRS, there was discussion around the company’s acquisition strategy. In our view, management didn’t say much insightful on the topic, and comments were mostly perfunctory.

Key Stats: Adjusted expenses were up 4% from investment spending, merit-based pay increases, and the impact of a weaker US dollar. We note that full-time employees finished the quarter at 49,900, down from 51,000 at the beginning of the quarter and 52,000 last year.

• Management continues to embrace artificial intelligence solutions. It noted that employee adoption of its AI platform, Eliza, was 96% at the end of the quarter versus 36% at the beginning of the year.