BNY Mellon’s Upcoming Q3 Earnings: Fee Growth and Challenges Ahead

BNY Mellon's Q3 Earnings Preview

The Bank of New York Mellon Corporation (NASDAQ: BK) is preparing to announce its third-quarter 2024 financial results. The release is scheduled for an upcoming morning, just before the markets open. Analysts anticipate that both revenues and earnings will demonstrate growth compared to the same quarter last year, a promising sign for investors.

In the previous quarter, BNY Mellon achieved results that exceeded analyst expectations. This success was largely driven by a significant increase in fee revenues and a decrease in overall expenses. Furthermore, the company's assets held under custody and management saw substantial increases, primarily due to a favorable market environment. Despite this positive trend, net interest revenues (NIR) have posed challenges for the bank.

Performance Insights and Future Expectations

BNY Mellon's impressive track record is highlighted by its consistent ability to surpass consensus estimates. Over the last four quarters, BK has regularly outperformed predictions, boasting an average earnings surprise of nearly 10%.

Price and Earnings Overview

The current forecast for BK's third-quarter earnings stands at $1.40 per share, reflecting a minor upward revision over the last week. This figure indicates a noteworthy increase of 10.2% from the earnings reported in the same quarter last year.

The anticipated sales figure for this quarter is approximately $4.52 billion, suggesting a growth of 3.3% year-over-year.

Key Revenue Drivers for Q3

Fee Revenues: A crucial aspect of BNY Mellon's revenue is its investment services fees, which comprise a significant portion of total revenues. For this quarter, the Zacks Consensus Estimate for these fees is projected at $2.34 billion, indicating a 5% increase from the previous year. Our own estimate is slightly more optimistic at $2.39 billion.

The estimates for financing-related fees indicate a significant year-over-year rise to about $52.5 million, with our forecast being slightly higher at $55.9 million.

Distribution and servicing fees are expected to reach around $41.7 million, suggesting a notable increase of 6.8%. We estimate this figure will be around $42.7 million.

Additionally, foreign exchange trading has picked up due to market volatility and heightened hedging needs amid global uncertainties. The anticipated foreign exchange revenues are pegged at $179.6 million, representing a healthy rise of 16.6%. Our estimate for these revenues is a bit more conservative at $165.5 million.

Overall, the total fees, including other revenues, are estimated to be around $3.55 billion, suggesting a 5.6% increase. We are forecasting $3.59 billion for this metric.

Challenges in Net Interest Revenues

The Federal Reserve's recent decision to implement a 50-basis point rate cut has raised concerns about the impact on BNY Mellon's NIR. Despite these challenges, the bank is expected to maintain a resilient stance. The inverted yield curve and high funding costs during the quarter may have put pressure on interest income, but indications of potential future rate cuts signal a stabilizing lending environment.

The consensus estimate for NIR is set at $967.8 million, marking a decline of 4.8% compared to the same quarter last year. Our estimate stands at $898.3 million, reflecting a cautious outlook.

Expense Control

BNY Mellon has faced increasing expenses due to restructuring initiatives. However, as a result of streamlining operations, overall costs are expected to show some moderation for the current quarter. We estimate non-interest expenses will approximate $3.12 billion, indicating a slight year-over-year decline.

Assessment for BNY Mellon

Our analysis of BNY Mellon's potential to exceed the consensus earnings estimates looks promising. The bank shows a positive Earnings ESP of +0.14% and currently holds a Zacks Rank of 2, indicating a 'Buy' recommendation.

Other Notable Bank Stocks

In addition to BNY Mellon, investors may want to keep an eye on other banking institutions that have similar prospects for positive earnings surprises. First Community Corporation (NASDAQ: FCCO) shows an Earnings ESP of +1.12% and is expected to announce its earnings by mid-next week. Meanwhile, 1st Source Corp (NASDAQ: SRCE), rated a Strong Buy, has an Earnings ESP of +4.80% and will be sharing its quarterly results towards the end of this month.

Frequently Asked Questions

When will BNY Mellon report its Q3 earnings?

BNY Mellon is expected to announce its third-quarter earnings before the market opens on an upcoming morning.

What are the expected earnings per share for BK?

The anticipated earnings per share for BNY Mellon in Q3 are projected to be $1.40.

How has BK performed against analysts' expectations?

BK has consistently exceeded analysts' expectations over the last four quarters, with a notable average beat of approximately 9.92%.

What challenges is BK facing in its NIR?

BNY Mellon is dealing with challenges in net interest revenues impacted by a recent Federal Reserve rate cut and an inverted yield curve.

Which other banks are worth watching for Q3 earnings?

Investors may consider monitoring First Community Corporation and 1st Source Corp, both showing favorable conditions for earnings growth.

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