Lower Interest Rates Hold Back Bank of New York Mellon
The COVID-19 pandemic has been tough on the financial sector. Banks have had to take massive provisions for future credit losses, while real estate investment trusts must deal with struggling tenants who can't make rent. In this environment, financial stocks with more limited levels of credit risk have proven resilient -- but that doesn't necessarily mean they've been immune to the crisis. Bank of New York Mellon (NYSE: BK) can attest to that: The Federal Reserve's dramatic actions to support the economy have had some negative effects on its earnings.
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BNY Mellon's business model is a bit different than that typically used by commercial banks, which take deposits and then use those funds to make loans or investments. As more of a trust bank, BNY Mellon earns its income from fees. It's the custodian bank for many mutual funds and major corporations, handling many of their day-to-day activities, such as making distributions and taking in new funds. Its Pershing unit -- a global financial solutions provider that handles the clearing of trades, among many other things -- is another big part of the institution.
Source Fool.com
