Bank of New York Mellon (BK) is higher today following an upgrade and a downgrade.
Let’s have the good news first. Morgan Stanley’s Betsy Graseck and her team boosted their rating on the stock to Overweight from Equal Weight, with a $64 price target, writing that the selloff following the bank’s plan to invest much of its tax savings in its business is overblown.
Graseck likes Bank of New York’s tech-focused CEO, who she writes understands that “significant digital investments” are required to drive the next leg of operating leverage in custody banking. She believes the bank’s strategy will bring market share gains for the stock, hence her positive stance.
By contrast, JPMorgan’s Vivek Juneja and his team cut their rating on Bank of New York to Underweight from Neutral, with a price target of $55.50, calling its fourth-quarter report “very messy.”
Although Juneja agrees with Graseck that Bank of New York is making the right moves by investing its tax savings largely in technology, he warns that this will lead to “sizable restructuring charges” this year. As such, his downgrade comes as corporate tax cuts won’t flow as much to the bottom line for Bank of New York as its peers, along with the fact that he sees revenues and earnings expectations under pressure and he’s concerned about valuation.
Bank of New York is up 2.4% to $56.70 this afternoon.