Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



1 Reason BNY Mellon Will Plunge After Announcing Earnings

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Brace yourselves, investors -- Bank of New York Mellon (NYSE: BK  ) stock is about to plummet after it announces earnings on Wednesday. The reason is simple: Its function as a trust bank seemingly locks it into the performance of its large banking customers. If the experience Wells Fargo (NYSE: WFC  ) stock had last week after releasing record earnings is any indicator, BNY Mellon could also be hampered by declining net interest margin.

Though it has the word "bank" in its name, BNY Mellon isn't a traditional bank that you or I would do business with. It doesn't offer traditional banking products like checking accounts or mortgages, but instead acts as an intermediary between larger institutions conducting enormous financial transactions. That said, it makes a lot of money charging interest on the money it holds in the short term for its customers, so low interest rates are impacting the bottom line.

I could be completely wrong in this assessment, however. One of the reasons that investors have flocked to BNY Mellon in the past is its relative safety in comparison to the larger banks. Because it isn't in the mortgage business, it doesn't have to worry about toxic assets coming back to harm its balance sheet. It also has some of the most dedicated customers in the world, and banks like Wells Fargo aren't going to take their business elsewhere on a whim.

What it means to you
With all that said, I think the bank is poised for at least a small drop-off after its earnings release. Not only is its success tied to its business model and the performance of its customers, but it is also trading near its 52-week high. It seems to me that the bank has ridden the wave of success that the financial sector seems to be enjoying right now, and it might be time for a slight pullback. Be sure to check back here on Wednesday to see how the market reacts to the bank's earnings release.

While some big banks continue to limp through their post-crisis recovery, Bank of New York Mellon has bounced right back. Though the bank is an 800-pound gorilla in the custody and asset management business, a new regulatory environment could be either a big new opportunity or a considerable risk. To help figure out whether this banker's bank is worthy of a spot on your watchlist, you're invited to check out The Motley Fool's new premium research report on BNY Mellon. Click here now to claim your copy, and receive a full FREE year of key updates and guidance as news develops.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2197045, ~/Articles/ArticleHandler.aspx, 9/27/2016 10:01:04 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 45 minutes ago Sponsored by:
DOW 18,228.30 133.47 0.74%
S&P 500 2,159.93 13.83 0.64%
NASD 5,305.71 48.22 0.92%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/27/2016 4:02 PM
BK $39.50 Down -0.05 -0.13%
The Bank of New Yo… CAPS Rating: ****