BNY (BK)

Global financial services company BNY NYSE:BK) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 9.3% year on year to $5.08 billion. Its GAAP profit of $1.88 per share was 6.7% above analysts’ consensus estimates.

Company Overview

Tracing its roots back to 1784 when it was founded by Alexander Hamilton, BNY (NYSE:BK) is a global financial institution that provides asset servicing, wealth management, and investment services to institutions, corporations, and high-net-worth individuals.

Custody banks safeguard financial assets and provide services like settlement, accounting, and regulatory compliance for institutional investors. Growth opportunities stem from increasing global assets under custody, demand for data analytics, and blockchain technology adoption for settlement efficiency. Challenges include fee pressure from large clients, substantial technology investment requirements, and competition from both traditional players and fintech firms entering the space.

BNY's primary competitors include other global custody banks and financial services firms such as State Street Corporation (NYSE:STT), JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), and Northern Trust (NASDAQ:NTRS). In wealth management and investment services, it also competes with firms like BlackRock (NYSE:BLK) and Morgan Stanley (NYSE:MS).

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, BNY grew its revenue at a sluggish 3.4% compounded annual growth rate. This was below our standard for the financials sector and is a tough starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. BNY’s annualized revenue growth of 6.9% over the last two years is above its five-year trend, but we were still disappointed by the results. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, BNY reported year-on-year revenue growth of 9.3%, and its $5.08 billion of revenue exceeded Wall Street’s estimates by 2.4%.

Fee-based revenue represents the income a financial firm generates from activities such as M&A advisory, capital raising, and ongoing client servicing arrangements.

BNY’s fees have grown at an annual rate of 4.1% over the last five years, worse than the broader financials industry but faster than its total revenue. This tells us its advisory and servicing operations helped top-line performance. When analyzing BNY’s fees over the last two years, we can see that growth accelerated to 5.6% annually.

In Q3, BNY’s fees were $2.55 billion. This print was 8.4% higher than the same quarter last year.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For Custody Bank companies, we look at pre-tax profit rather than the operating margin that defines sectors such as consumer, tech, and industrials.

Interest income and expenses play a big role in financial institutions' profitability, so they should be factored into the definition of profit. Taxes, however, should not as they are largely out of a company's control. This is pre-tax profit by definition.

Over the last four years, BNY’s pre-tax profit margin has fallen by 5.4 percentage points, going from 28.5% to 33.9%. It has also expanded by 6.7 percentage points on a two-year basis, showing its expenses have consistently grown at a slower rate than revenue. This typically signals prudent management.

In Q3, BNY’s pre-tax profit margin was 36.4%. This result was 3.6 percentage points better than the same quarter last year.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

BNY’s EPS grew at an unimpressive 8.7% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 3.4% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For BNY, its two-year annual EPS growth of 27.3% was higher than its five-year trend. This acceleration made it one of the faster-growing financials companies in recent history.

In Q3, BNY reported EPS of $1.88, up from $1.50 in the same quarter last year. This print beat analysts’ estimates by 6.7%. Over the next 12 months, Wall Street expects BNY’s full-year EPS of $6.93 to grow 11.1%.

Financial institutions manage complex balance sheets spanning various financial activities. Valuations reflect this complexity, emphasizing balance sheet quality and long-term book value compounding across multiple revenue streams.

Because of this, tangible book value per share (TBVPS) emerges as the critical performance benchmark for the sector. This metric captures real, liquid net worth per share that reflects the institution’s overall financial health across all business lines. EPS can become murky due to the complexity of multiple revenue streams, acquisition impacts, or accounting flexibility across different financial services, and book value resists financial engineering manipulation.

BNY’s TBVPS grew at a decent 8.3% annual clip over the last five years. TBVPS growth has accelerated recently, growing by 26.4% annually over the last two years from $19.15 to $30.60 per share.

Return on equity, or ROE, quantifies bank profitability relative to shareholder equity - an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.

Over the last five years, BNY has averaged an ROE of 9%, uninspiring for a company operating in a sector where the average shakes out around 10%.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, BNY has averaged a Tier 1 capital ratio of 11.7%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

It was good to see BNY beat analysts’ EPS and tangible book value per share expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock remained flat at $110 immediately after reporting.

Updated: December 4, 2025 at 11:28 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own BNY, you should also grasp the company’s longer-term business quality and valuation.

BNY’s business quality ultimately falls short of our standards. To begin with, its revenue growth was weak over the last five years, and analysts don’t see anything changing over the next 12 months. And while its expanding pre-tax profit margin shows the business has become more efficient, the downside is its TBVPS growth was weak over the last five years. On top of that, its fee growth was uninspiring over the last five years.

BNY’s P/E ratio based on the next 12 months is 14.2x. Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $118.03 on the company (compared to the current share price of $113.95).