Bank of New York on Thursday delivered top- and bottom-line beats, with better-than-expected fee-based revenue and net interest income, as well as healthy pre-tax margin expansion. The strength of the quarter set the stage for management to boost full-year guidance. Revenue in the third quarter rose 12% year over year to $5.7 billion, ahead of the $5.5 billion consensus, according to the analyst estimates compiled by data provider LSEG. This marks BNY’s 15th consecutive quarter of year-over-year revenue growth. Adjusted earnings per share (EPS) in the three months ended Sept. 30 jumped 24% to $2.37, which excludes a 3-cent-per-share severance expense, versus the $2.27 expected, according to LSEG data. Bottom Line Wall Street clearly liked what it heard on the post-earnings conference call because BNY stock went from flat to up more than 3% on the day. While it could always get swept lower given this week’s brutal sell-off on AI funding and midterm fears, we think the results point to any weakness as a buying opportunity for those able to stomach increased volatility between now and the next month’s elections, which is why we opted to step in and pick up a few more shares Thursday morning. We are reiterating our buy-equivalent 1 rating and $180 price target. BNY YTD mountain Bank of New York YTD BNY may not be the largest bank in the world by revenue, but it is the largest custodian bank in the world. While it may manage only about $2 trillion in assets, it is in charge of safeguarding more than $60 trillion worth of assets. Managed assets are those for which BNY has decision-making power, such as portfolio structure, asset allocation, and so on. For assets under custody, BNY acts as a protector with administrative responsibilities. In both cases, BNY generates fees. However, fees generated from managed assets are tied to market fluctuations, making them more volatile, while those tied to the much larger custodian business tend to be far more stable. When initiating BNY on Sept. 2, we highlighted the bank’s heavily fee-based business model as an attractive diversifier versus the deposits and loans focus of Wells Fargo and the investment banking and wealth management focus at Goldman Sachs. Assets under custody/administration increased 10% thanks to an increase in market values, net client inflows, and net new business. As a result, BNY delivered the fee-based revenue results we were looking for, even as a 2% year-over-year increase in assets under management was a tad less than the Street was looking for. Fee-based revenues outpaced expectations, growing 12% year over year on strength pretty much across the board. The team attributed the growth to “net new business, higher client activity and higher market values,” partially offset by the mix of assets under management (AUM) flows. Quarterly commentary Net-interest income (NII) was also better than expected, increasing 15% versus the year-ago period as investment securities were reinvested at…
Read More: BNY stock pops on strong earnings — showing exactly why we like this bank