Magazine article American Banker

Bank of New York Gets Vote of Prudential's Mayo

Magazine article American Banker

Bank of New York Gets Vote of Prudential's Mayo

Article excerpt

A Wall Street analyst who upgraded Bank of New York Co. Inc.'s shares said it should benefit when trading volumes improve after Election Day.

Prudential Equity Group's Michael L. Mayo, who upgraded the stock to "overweight" from "neutral weight" Tuesday, wrote that data going back more than a century show that in the months after elections, trading can increase 20% in close ones and 30% in general.

"Two factors that seem to differentiate election years from non-election years are the margin of victory and whether or not the incumbent wins," he wrote.

General capital markets trading typically rises 10% in the fourth and first quarters combined, against 5% in the second and third quarters, Mr. Mayo wrote. Shares of processing banks typically increase 15% and 6% respectively in those periods, he wrote.

All companies that do securities processing, brokerage, execution and clearing, and asset management should get a lift from busier trading, but among the processing banks Bank of New York stands to benefit the most because its processing revenues remain strongly linked to quarterly trading volume on the New York Stock Exchange, Mr. Mayo wrote. Other processing banks include State Street Corp. and Mellon Financial Corp.

Mr. Mayo said Bank of New York's fundamentals will probably improve after the third quarter as well, because of better momentum in securities servicing, the resumption of share buybacks, and good expense control.

He raised the possibility that the $97.5 billion-asset company could consider selling its retail division to raise funds for acquisitions in securities servicing or asset management. …

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