Mellon Financial Corp., which has been mulling the sale of its retail branch network, could announce a decision as early as this morning, when it reports its second-quarter earnings, a source familiar with the situation said.
The would-be buyer is widely held to be Citizens Financial Group of Providence, R.I., a Royal Bank of Scotland unit.
Mellons board met Monday to decide the issue, according to The Wall Street Journals online edition. A spokesman for the company, which is based in Pittsburgh, would not comment on whether the meeting had taken place.
Mellons recent efforts to concentrate on capital-markets-driven fee businesses and model itself along the lines of Bank of New York Co. and State Street Corp. in securities processing and servicing could prove risky. On Monday Bank of New York, a giant in the securities processing business, missed second-quarter earnings estimates and warned of a slow second half if markets stay volatile. Its stock fell 13%.
On Monday Mellons stock fell 5.3%, to close at $42.21. State Street Corp., which did not report earnings Monday, lost 5.53% and closed at $48.49.
After Bank of New York reported lower increases in earnings per share than in the past, investors are saying: What do we have to look forward to with Mellon? said Anthony Polini, an analyst at Advest Inc. in New York.
Analysts also said that some of Mellons recent decline may be fallout from the expected deal. From July 6, when Mellons plans were first reported, to the close of trading Friday, Mellons stock lost 2%. The decline occurred because analysts said a sale of the retail network, which contributes about 25%, or $290 million, to the companys earnings, would shave 10% to 20% from annual earnings per share.
But with Bank of New York reporting that a global capital markets slowdown has depressed revenues from its trust business, and that its 8% earnings-per-share growth could be the norm for the rest of the year, these fee-based businesses are losing their luster for investors.
If Mellon agrees to sell its network of about 350 branches, which are mostly in Pennsylvania, with some in New Jersey and Delaware, the company will be more of a pure-play financial company, said Denis Laplante of Fox-Pitt Kelton.