Financials Weekly Notes: BNY Mellon, JPMorgan, Morgan Stanley

The first full trading week for the year 2015 started out on a weak note, with shares across sectors witnessing sharp declines over Monday (January 5) and Tuesday (January 6). The S&P 500 index ended up with its worst single-day loss in more than three months on Monday after continued declines in oil prices were seen as a sign of a global economic slowdown, as worse-than-expected economic data from Germany and the looming possibility of Greece exiting the euro triggered a sell-off among investors. The trend continued on Tuesday as U.S. non-manufacturing sector and  factory output data failed to meet expectations. Things turned upbeat on Wednesday, though, when an improvement in private sector jobs figures for the month of December and a stabilization in oil prices helped calm investors’ nerves and resulted in the S&P 500 reporting a full-day gain for the first time this year. The equity market gained again on Thursday as investors reacted positively to the Federal Reserve’s decision to stay its course in terms of interest-rate hikes, as well as to the increasing likelihood of the European Central Bank (ECB) implementing measures to stimulate economic growth in the Eurozone.

The KBW Bank Index lost more than 3% over the week through Thursday – underperforming the S&P 500, which was marginally higher than its value at the end of last week.

Bank of New York Mellon

BNY Mellon (NYSE:BK) closed the acquisition of Cutwater Asset Management – a subsidiary of the municipal bond insurance giant MBIA – earlier this week. ^[1] New York-based Cutwater manages around $22 billion in fixed income assets, which will complement the $1.6 trillion in assets managed by BNY Mellon’s investment management division. Financial details of the deal have not been disclosed. You can read more about the deal and its implications for BNY Mellon as a part of our article BNY Mellon Strengthens Fixed Income Offerings With Cutwater Acquisition.

• Trefis has a $39 price estimate for BNY Mellon’s shares, translating into a $44 billion market cap. This is roughly around the market price seen over the week.
• We estimate the company’s FY 2014 revenues to be around $15 billion for an earnings per share of $2.42, compared to a consensus of $2.40 according to Reuters

See our full analysis for BNY Mellon

JPMorgan

JPMorgan (NYSE:JPM) reached a $100 million settlement with various U.S. counterparties, market participants and other investors over a series of lawsuits that alleged manipulation of global foreign exchange rates by the banking giant. ^[2] The settlement follows the $660 million that JPMorgan agreed to pay regulators last November as a part of the five-bank group that settled forex investigations by U.S., British and Swiss regulators for a total of $3.4 billion (see Five Banks Settle Forex Manipulation Charges For $3.4 Billion). The move is expected to prompt similar settlements by other global banking giants over the coming months.

• Trefis has a $65 price estimate for JPMorgan’s shares, translating into a $243 billion market cap. This is about 10% ahead of the market price of $58-60 seen over the week.
• We estimate the company’s FY 2014 revenues to be $96 billion for earnings per share of $5.46, compared to a consensus of $5.48 according to Reuters

See our full analysis for JPMorgan

Morgan Stanley

Morgan Stanley (NYSE:MS) revealed earlier this week that one of its wealth management employees stole partial account information of about 10% of its total client base. ^[3] The rogue employee, who posted information about 900 of the bank’s clients online for a brief period, was promptly fired by the bank. The incident raised fresh concerns about internal controls and risk management at what is one of the world’s largest wealth manager.

• Trefis has a $38 price estimate for Morgan Stanley’s shares, translating into a $74.5 billion market cap. This is slightly ahead of the market price between $36-38 seen over the week.

See our full analysis for Morgan Stanley

RBS

The Royal Bank of Scotland Group (NYSE:RBS) saw its shares tank over the beginning of the week after a newspaper report late last week estimated settlement costs in excess of £5 billion ($7.5 billion) for its involvement in the origination and sale of poor quality mortgage-backed securities in the U.S. ^[4] The U.K.-based banking group, which is majority-owned by the British government, sold $32 billion in residential mortgage-backed securities in the run-up to the economic downturn of 2008, and has only provisioned £1.9 billion ($3 billion) to cover litigation costs arising from these misgivings. RBS and Nomura are the only two banks which have yet to settle mortgage-related lawsuits with U.S. regulators.

• Trefis has a $13 price estimate for RBS’s shares, translating into a $41 billion market cap. This is roughly 15% ahead of the market price of around $11.50 seen over the week.

See our full analysis for RBS

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1. BNY Mellon Acquires Cutwater Asset Management, BNY Mellon Press Releases, Jan 5 2014 [↩]
2. JPMorgan settles forex manipulation lawsuit, Financial Times, Jan 5 2015 [↩]
3. Morgan Stanley Says Employee Misappropriated Wealth Management Data, Morgan Stanley Press Releases, Jan 5 2015 [↩]
4. RBS ‘to be hit with £5bn toxic debt fine’, The Times, Jan 2 2015 [↩]