Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Good Stocks

Is Bank of New York Mellon the best Value in FinTech?

Bank of New York Mellon (NYSE: BK); the bank also known as BNY Mellon, might be the best value investment in banking and FinTech these days.

On November 23, 2016, BNY Mellon was trading at just $47.42 a share. Yet it reported having assets of $374.11 billion and cash and short-term investments of $99.73 billion on September 30, 2016. Like a number of other banks, Bank of New York, has a lot of value for a low price.

Where else can you get a piece of a $374.11 billion business with a historic past and interesting future for that low share price? BNY Mellon can trace its history back to an authentic Founding Father of the United States, Alexander Hamilton no less. It also lacks the sleazy reputation of some of the monster banks like Bank of America (NYSE: BAC) and Wells Fargo (NYSE: WFC).

That gives BNY Mellon (NYSE: BK) another value attribute, it has a low profile and no big reputation. It’s not sexy and not sleazy, and not in the headlines all the time, yet the company makes a lot of money.


BNY Mellon is Making Money

It also makes a lot of money; BNY Mellon reported $3.37 billion in net income and $15.17 billion in revenue for the third quarter of 2016. The revenue was up slightly from the $15.02 billion in June 2016 and $15.16 billion in September 2016.

More importantly the net income is growing, so the bank is making more money. Bank of New York reported a net income of $2.698 billion in September 2015 that grew to $3.158 billion in December 2015, $3.196 billion in March in March 2016, $3.216 billion in June 2016 and $3.37 billion at the end of third quarter.

That gives Mellon growing income in a difficult business, but it is also generating a lot of cash. Bank of New reported $1.519 billion in cash from financing and $1.699 billion in cash from operations at the end of third quarter.

Despite there are some problems at BNY Mellon it reported losing -$6.478 billion in cash from financing and a free cash flow of -$51 million. It also reported an impressive quarter margin of 25.04% according to ycharts.

Why BNY Mellon is also a FinTech Play

Bank of New York Mellon is not just a bank with offices in Manhattan it is a FinTech play. BNY Mellon is one of four major banks developing the Utility Settlement Coin or USC, with the technology companies Icap and Clearmatics, Crowdfund Insider reported.


USC is supposed to be a sort of bitcoin for banks. Like bitcoin, this cryptocurrency is based on distributed ledger technology but it is backed by assets in central banks. USC is designed to be used by Central Banks and to facilitate cash transfers between banks and central banks.

That’s a potential cash cow because central banks make a lot of money the U.S. Federal Reserve had $4.5 trillion in assets and sent $98.7 billion profits to the U.S Treasury in 2014. The Fed also reported a net income of $101.5 billion in 2014, and it’s just one central bank.

USC might also form the basis of new payment solutions such as Apple Pay pay type digital payment apps. These might be used all around the world with the other banks participating in USC which include Banco Santander (NYSE: SAN),  The Deutsche Bank (NYSE: DB) and UBS Group (NYSE: UBS).

One obvious use of USC would be to facilitate the creation of new wealth management products and new products to sell the wealthy. Many of them will want access to USC which will act as a proxy to assets stored in banks. The Utility Settlement Coin is scheduled for testing next year, and a rollout in 2017.


Bank of New York Mellon is an Income Investment

In addition to that Bank of New York Mellon is also an income investment which had a dividend yield of 1.52% on November 23, 2016. That gave investors a dividend of 19¢ on October 28, 2016.

That was an increase of 2¢ over 17¢ in January 2016, 15¢ in 2014 and 13¢ in 2013. This means BNY’s dividend has been growing by around 2¢ a year for the past few years which is not bad.

Best of all BNY Mellon gave investors a 9.4% return on equity on September 30, 2016. That makes it both a value investment with growth potential and a steady income.

If you are looking for a good steady income investment in the financial sector with a bright future but few risks check out BNY Mellon. Even if you don’t buy the stock you might learn a few things about Alexander Hamilton and blockchains.