Marcato Stake in BNY Mellon Reflective of Shareholder Concern, says CLSA’s Mayo

Hedge fund Marcato Capital Management bought a 1.6% stake in BNY Mellon last week in a move reflective of an increasingly disgruntled shareholder base, according to banking analyst.

According to an SEC filing, the firm’s stake is valued at $688 million, becoming the second activist investor to buy into the custody bank after Trian Fund Management bought a $1 billion stake in June this year.

BNY Mellon’s management has come under fire recently, largely due to the performance of its stock and rising operating expenses.

“I would describe this stake as reactive to a very agitated and disgruntled shareholder base, so activist shareholders will look to take advantage of that,” says Mike Mayo, bank analyst, CSLA Bank.

“It is unusual to have two externally activist shareholders in a bank, but that is reflective to the silent activists among the shareholder base that have been concerned over the share price in the long term. This stake will turn up the heat in an already fragile situation.”

BNY Mellon declined to comment.

The custodian held its first investor day in three years last month. Mayo wrote in an analysis note there is large unrest amongst investors over missed targets and concerning financial targets.

Furthermore, Mayo argues the stake could put additional pressure on the bank to restructure its businesses, specifically its asset management unit in which earlier this year he urged BNY Mellon to spin off: “The stake would also seem to keep the debate going about the structure of BNY’s asset management business.”

BNY Mellon has actively trimmed down its operations over the past two years, shutting down its derivatives clearing units in both the U.S. and Europe, while also exiting the derivatives sales and trading business.