Rationale for combined BNY-Northern ‘makes sense,’ says BofA

After The Wall Street Journal reported that BNY Mellon (BK) has approached custody bank peer Northern Trust (NTRS) for a possible merger, BofA said the strategic rationale of a potential deal “seems compelling to us” and “makes sense” given the scale benefits tied to the custody business and the potential addition of “a wealth management growth engine.” However, while the firm would positively view the strategic rationale of a potential deal and sees BNY management as best-in-class, the “devil lies in the details” and it is unclear whether a potential deal would encounter anti-trust issues given the scale of the pro-forma bank in the custody business. The firm, which would defer judgment until any potential deal terms were announced, adds that it is unclear whether there would be other potential buyers. BofA has a Buy rating and $98 price target on BNY shares.