Why Is BNY (BNY) Up 0.9% Since Last Earnings Report?

BNY Q2 Earnings Beat Estimate on Growth in NII & Fee Income

BNY’s second quarter 2026 earnings of $2.46 per share handily surpassed the Zacks Consensus Estimate of $2.20. Also, the bottom line increased 26.8% from the year-ago quarter.

Results primarily benefited from a rise in fee revenues and net interest income (NII). Also, the company recorded a provision benefit in the quarter, which was a tailwind. Growth in AUC/A and AUM balances further supported the results. However, higher expenses hurt the results to some extent.

Results excluded certain non-recurring items. Considering those, net income applicable to common shareholders (GAAP basis) was $1.7 billion, up 21.9% from the year-ago quarter.

Fee Revenues and NII Increase

Total revenues increased 13.3% year over year to $5.70 billion. The top line surpassed the Zacks Consensus Estimate of $5.38 billion.

Total fee revenues were $4.04 billion, up 10.8% year over year. Investment services fees increased 12.6% to $2.91 billion, supported by net new business, higher market values and increased client activity.

Investment management and performance fees rose 5% to $796 million. Foreign exchange revenues increased 7.5% to $229 million. Investment and other revenues totaled $216 million, up from $184 million in the prior-year quarter, reflecting improved seed capital results.

NII jumped 20.2% year over year to $1.45 billion. The increase reflected the reinvestment of investment securities at higher yields and balance-sheet growth, partly offset by deposit margin compression.

The net interest margin expanded 18 basis points (bps) year over year to 1.45%.

Average loans grew 20.1% from the prior-year quarter to $85.59 billion. Average deposits increased 4.6% to $314.04 billion.

Expenses Rise

Total non-interest expenses were $3.44 billion, up 7.3% year over year. Higher revenue-related costs, investments and employee salary increases drove the rise, partly offset by efficiency savings.

Despite higher costs, revenue growth outpaced expense growth. This generated 606 basis points of year-over-year operating leverage.

The pre-tax operating margin expanded to 39.8% from 36.6% a year earlier.

Asset Balances Expand

AUC/A were $62.6 trillion as of June 30, 2026, up 12.2% year over year. The increase reflected higher market values and net client inflows, partly offset by the unfavorable impact of a stronger U.S. dollar.

AUM increased 5.7% to $2.23 trillion. Higher market values supported the balance, though cumulative net outflows and currency movements were headwinds.

Credit Quality Improves

The allowance for loan losses, as a percentage of total loans, was 0.25%, down 13 bps from the prior-year quarter. As of June 30, 2026, non-performing assets were $33 million, down 79.5% from the year-ago quarter.

BNY recorded a provision benefit of $8 million compared with a benefit of $17 million in the year-ago quarter. The current-quarter benefit primarily reflected improvements in commercial real estate exposure, partly offset by changes in macroeconomic and other factors.

Capital Ratios Fall

As of June 30, 2026, the common equity Tier 1 ratio was 11%, down from 11.5% as of June 30, 2025. The Tier 1 leverage ratio was 5.9%, down from 6.6% as of June 30, 2025.

Share Repurchase Update

In the reported quarter, BNY repurchased shares worth $1.1 billion.

Outlook

Total revenues (excluding notable items) are now expected to rise 10-11% year over year in 2026, up from the previously mentioned growth of 6%.

NII in 2026 is now expected to increase 12-13%, higher than the prior target of approximately 10%.

Excluding notable items, 2026 expenses are now anticipated to rise 6-7%, higher than the previous 3.4% increase outlook. This is mainly due to higher revenue-related expenses. Alongside continued AI and technology investments, delivering positive operating leverage of 400 basis points is a key priority for the company.

For 2026, the quarterly tax rate is expected to be 23%.

Over the medium term, the company expects pre-tax margin (excluding notable items) of around 38%. The ROTCE is expected to be roughly 28%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

Currently, BNY has a subpar Growth Score of D, a score with the same score on the momentum front. Charting a somewhat similar path, the stock has a score of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise BNY has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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This article originally published on Zacks Investment Research (zacks.com).

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