Critical Comparison: Bank of New York Mellon (NYSE:BK) vs. TowneBank (NASDAQ:TOWN)

TowneBank (NASDAQ:TOWN) and Bank of New York Mellon (NYSE:BK) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their risk, analyst recommendations, profitability, valuation, dividends, institutional ownership and earnings.

Dividends

TowneBank pays an annual dividend of $1.00 per share and has a dividend yield of 2.9%. Bank of New York Mellon pays an annual dividend of $1.88 per share and has a dividend yield of 2.3%. TowneBank pays out 50.3% of its earnings in the form of a dividend. Bank of New York Mellon pays out 40.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. TowneBank has increased its dividend for 13 consecutive years and Bank of New York Mellon has increased its dividend for 14 consecutive years.

Institutional and Insider Ownership

56.0% of TowneBank shares are held by institutional investors. Comparatively, 85.3% of Bank of New York Mellon shares are held by institutional investors. 8.1% of TowneBank shares are held by insiders. Comparatively, 0.1% of Bank of New York Mellon shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares TowneBank and Bank of New York Mellon’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
TowneBank	14.89%	7.32%	0.90%
Bank of New York Mellon	9.44%	12.06%	1.05%

Analyst Ratings

This is a summary of current recommendations for TowneBank and Bank of New York Mellon, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
TowneBank	0	0	1	0	3.00
Bank of New York Mellon	0	5	10	0	2.67

TowneBank currently has a consensus target price of $40.00, suggesting a potential upside of 16.65%. Bank of New York Mellon has a consensus target price of $87.14, suggesting a potential upside of 4.60%. Given TowneBank’s stronger consensus rating and higher possible upside, research analysts clearly believe TowneBank is more favorable than Bank of New York Mellon.

Volatility & Risk

TowneBank has a beta of 0.93, suggesting that its share price is 7% less volatile than the S&P 500. Comparatively, Bank of New York Mellon has a beta of 1.08, suggesting that its share price is 8% more volatile than the S&P 500.

Valuation & Earnings

This table compares TowneBank and Bank of New York Mellon”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
TowneBank	$941.58 million	2.73	$153.71 million	$1.99	17.23
Bank of New York Mellon	$33.81 billion	1.79	$3.29 billion	$4.60	18.11

Bank of New York Mellon has higher revenue and earnings than TowneBank. TowneBank is trading at a lower price-to-earnings ratio than Bank of New York Mellon, indicating that it is currently the more affordable of the two stocks.

Summary

Bank of New York Mellon beats TowneBank on 11 of the 17 factors compared between the two stocks.

About TowneBank

TowneBank provides retail and commercial banking services for individuals, commercial enterprises, and professionals. The company operates through three segments: Banking, Realty, and Insurance. It accepts various deposits, including demand deposits, savings accounts, money rate savings, certificates of deposit, and individual retirement accounts. The company also offers secured and unsecured personal loans for financing automobiles, home improvements, education, and personal investments; commercial loans for working capital, business expansion, and equipment and machinery purchases; and mortgage loans, as well as real estate acquisition, development, and construction loans. In addition, it provides other services, such as safe deposit boxes, treasury management services, direct deposit of payroll and social security checks, and automatic drafts for various accounts, as well as online, mobile, and on-call banking services. Further, the company offers documentation services to accomplish tax deferral to investors; investment and asset management services; commercial mortgage brokerage services; and other financial services, such as financial, retirement, and estate planning services, as well as assistance on various investment options comprising alternative investments, annuities, margin accounts, convertible bonds, and pension and profit-sharing plans. Additionally, it provides residential real estate, relocation, property management, vacation rentals, and title and settlement services; and originates residential mortgage loans. The company also offers life, property, casualty, and vehicle insurance services; and employee benefit programs, such as health, dental, vision, and disability insurance. It operates in Richmond, Virginia, the Greater Hampton Roads region in southeastern Virginia, northeastern North Carolina, Raleigh, Charlotte, Greensboro, and Greenville, North Carolina. TowneBank was incorporated in 1998 and is based in Portsmouth, Virginia.

About Bank of New York Mellon

The Bank of New York Mellon Corporation provides a range of financial products and services in the United States and internationally. The company operates through Securities Services, Market and Wealth Services, Investment and Wealth Management, and other segments. The Securities Services segment offers custody, trust and depositary, accounting, exchange-traded funds, middle-office solutions, transfer agency, services for private equity and real estate funds, foreign exchange, securities lending, liquidity/lending services, and data analytics. This segment also provides trustee, paying agency, fiduciary, escrow and other financial, issuer, and support services for brokers and investors. The Market and Wealth Services segment offers clearing and custody, investment, wealth and retirement solutions, technology and enterprise data management, trading, and prime brokerage services. This segment also provides integrated cash management solutions, including payments, foreign exchange, liquidity management, receivables processing and payables management, and trade finance and processing services. The Investment and Wealth Management segment offers investment management strategies and distribution of investment products, investment management, custody, wealth and estate planning, private banking, investment, and information management services. The Other segment engages in the provision of leasing, corporate treasury, derivative and other trading, corporate and bank-owned life insurance, renewable energy investment, and business exit services. It serves central banks and sovereigns, financial institutions, asset managers, insurance companies, corporations, local authorities and high net-worth individuals, and family offices. The Bank of New York Mellon Corporation was founded in 1784 and is headquartered in New York, New York.