Bank of New York Co. said it has raised a performance estimate and will earmark $500 million for acquisitions this year.
Senior executives at the $63 billion-asset banking company told an annual meeting of Wall Street analysts last month that they have targeted average return on equity of 24% by 2001, compared with the goal of 23% for that year set in 1997.
From 1995 through 1997, the bank's average return on equity was 19.3%. Full-year 1998 figures are not yet available.
Thomas A. Renyi, Bank of New York's chairman and chief executive officer, also told analysts the company would set aside $700 million in 1999 for stock buybacks and $500 million for acquisitions.
At the end of 1997, the company said it would set aside $400 million for acquisitions in 1998.
The company said it has set a 27% growth target for noninterest income in 1999. It expects noninterest income to make up 58% of total revenues. The growth is projected to come from previous acquisitions in securities processing and custody services and from higher-than-anticipated trading volume.
Though many banks have spent the last few years diving into stock underwriting, Bank of New York has built itself into one of the three largest providers of securities processing services. Since 1993, it has made 25 deals for corporate trust portfolios, five for custody portfolios, and five for asset-based lending businesses.
Analysts said this has helped differentiate Bank of New York and will continue to fuel its growth.
"Securities processing is far more consolidated than other financial services," said Henry C. Dickson, an analyst at Salomon Smith Barney. The explosion in retirement-fund investing, advances in technology, and growth in capital markets are expected to boost trading volume in coming years and, therefore, fees from securities processing, Mr. Dickson added.
"Bank of New York is in good shape to capitalize on that," Mr. Dickson said.
Securities processing is also fairly immune from the narrowing interest rate margins and market shocks that have afflicted earnings at many other banks, analysts said.
Analysts who attended the meeting said they welcomed the positive outlook for a year in which many major banking companies may have sluggish revenue growth.
"We have been worried about earnings growth slowing down this year, but Bank of New York is fairly insulated from that," said analyst George Bicher of BT Alex. Brown.