These bank stocks got the biggest earnings bump.

Can we continue to excel?

Over the past three days, investors have been inundated with news about banking stocks, with them being the first to hear about them every quarter.

With just about every major bank reporting fourth-quarter earnings as of Friday afternoon, we can assume it was a pretty solid quarter for banks, as most of them saw big revenue spikes.

The KBW Nasdaq Bank Index, which tracks the performance of large banks, rose about 7% this week due to strong overall performance.

But one stock stood out and had the biggest gain after earnings. Bank of New York Mellon (NYSE:BK), commonly referred to as BNY Mellon. It’s up about 8% since Wednesday morning, trading at about $83 per share.

It’s not your typical bank.

BNY Mellon differs from most banks in that it is a custodian bank that holds the assets of large institutions, corporations, pensions and investment managers, including mutual fund and ETF assets. As custodians of these assets, they keep them safe and provide a variety of services such as asset servicing, accounting, securities lending, clearing, flows, etc. For these services, they often charge fees based on asset level. It is the largest custodian in the United States, managing approximately $52 trillion in assets.

BNY Mellon also operates its own asset management business and manages approximately $2 trillion in assets. However, the storage business generates most of the revenue.

Therefore, unlike traditional banks, they are not primary lenders, so they do not have the type of credit risk from unpaid or delinquent loans and are less dependent on interest rates and income. Although they hold assets, they are not consumer deposits or corporate deposits; they are the assets of large corporations and corporations. Huge amounts of assets are considered sticky because they are complex, difficult to move, and there are only a few players big enough to service them.

Thus, BNY Mellon has carved out a strong niche for itself and has been able to explore and outperform in many different types of markets.

Record sales and net profit

But the past two years in particular have been huge for BNY Mellon. The stock market has risen more than 20% for two consecutive years, the first time since the dot-com boom. This increased the total assets, which led to higher fees and increased profits for BNY Mellon.

In the fourth quarter, assets under management increased about 10% to $52 trillion. Total revenue for the quarter increased 11% to $4.8 billion, with fee income accounting for $3.5 billion of that. Fee revenue increased approximately 9%, reflecting the increase in assets under custody. Net interest income increased 8% to $1.2 billion.

Net income soared to $1.1 billion, or $1.54 per share. On an adjusted basis, earnings per share were $1.72, up 33% year-over-year. It also easily beat expectations of $1.56 per share.

For the full year 2024, BNY Mellon reported record revenues of $18.6 billion, up 5% from the previous year, and net income of $4.5 billion, up 38% from the previous year.

Is BNY Mellon stock a buy?

BNY Mellon’s outlook remains good through 2025. The company has guided for $4.3 billion in NII for 2025, which would be a mid-single-digit rise in percentage terms. Fee revenue is expected to increase in 2025 from $13.6 billion in 2024, but the company has not benefited from this. Additionally, costs are expected to increase by only 1 to 2 percent this year.

Additionally, BNY Mellon has targeted a pre-tax margin of 31% to 33% in 2024.

“We launched a new commercial coverage model, developed new products and solutions for our customers, completed a brand refresh, announced and completed our first acquisition in several years, and began a phased transition to a strategic platform operating model. .” said Robin, President and CEO. Vince said on the earnings call: “We have also continued to invest in our culture and attract top talent to further strengthen our team. We enter 2025 with strong momentum on the right path to realize the opportunities inherent to our company.”

BNY Mellon stock received about half a dozen price target upgrades from leading analysts following the earnings release. Goldman Sachs and KBW both raised their price targets for BNY Mellon to $96 per share, while Truist increased it to $93 per share.

If the stock is currently priced at $83 per share, this would be a return of 12% to 16%. Still, after a 50% return over the past year with a reasonable valuation, BNY Mellon stock remains a solid and stable option in uncertain times.