Analyst Sees Earnings At Mellon as Sluggish

It may be several years before Mellon Bank Corp.'s stock price can reach the levels offered by Bank of New York Co. right now, according to PaineWebber Inc. analyst Ruchi Madan.

In a report issued Monday, Ms. Madan said she believes Bank of New York's earnings are likely to grow by 13% to 15% annually, thanks mainly to growth in its processing businesses.

She forecast Mellon's earnings would grow 12% annually, mainly because she expects sluggish growth in its corporate and retail banking businesses, which account for about half of Mellon's earnings.

Bank of New York made public an unsolicited bid for Mellon on April 22.

The company has offered 1.4 of its own shares for each Mellon share.

At current stock prices, the offer is worth $83.3875 a share.

If Bank of New York's earnings grow faster than Mellon's, the Pittsburgh banking company might never be able to reward its shareholders as richly as it could by accepting Bank of New York's unfriendly offer, Ms. Madan maintained.

"This implies that Mellon can never make shareholders whole for the rejected offer," she wrote.

She said that even if Bank of New York were to see its earnings growth rate fall to 8% annually, it would take Mellon shareholders eight years to "become whole for not getting the price offered by Bank of New York today."

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