Shares of investment bank Bank of New York Mellon (NYSE: BK) initially sold off on its third-quarter earnings report this morning, despite beating estimates. However, the stock recovered and surged into positive territory once the company's earnings call began, as management's comments seemed to reassure investors that its turnaround was making progress.
The stock had traded down as much as 5.2% in the morning but was up 3.9% as of 12:28 p.m. ET.
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Bank of New York Mellon posts a double beat
The investment bank said that revenue in the quarter rose 2% to $4.37 billion, edging out estimates of $4.33 billion. Net interest revenue was up 10% to $1.02 billion, while fee revenue was flat at $3.36 billion.
Average loans were down 6% to $63.5 billion, while average deposits fell 9% to $288.5 billion. On the bottom line, adjusted earnings per share were up 5% to $1.27, ahead of the consensus at $1.15.
It wasn't clear why the stock initially sold off, though quarter-over-quarter comparisons were less flattering as revenue and profits both fell sequentially and net interest revenue was down 8%.
The stock gained 6% in the span of about 20 minutes shortly after the earnings call began. Management promised to deliver an expanding operating margin as it continues to execute its turnaround. It also said that average deposits had started to pick up again in September and October and promised to self-fund more than $500 million of incremental investments from efficiency savings.
Is BNY Mellon a buy?
Like the rest of the banking sector, BNY Mellon is bound by broader macroeconomic factors, including interest rates and the overall health of the global economy, and the sector is still facing uncertainty. Management continues to target $20 billion in net interest revenue for the full year and expects to beat its earlier expense growth target of 4%, bringing it down to closer to 3% for the year.
While BNY Mellon has mostly traded sideways over the last 20 years, the business looks solid. Investors will benefit from the company's 4% dividend yield and commitment to share buybacks.
BNY Mellon stock might not beat the market but is not a bad place to park your cash and earn a solid dividend yield. This is especially true if you're an income investor.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
