Bank of New York - Is IT finally happening?

Bank of New York (BK) may have finally done some restructuring. I eagerly await.

Rumors have been swirling that BK has sold its retail branches to JPMorgan-Chase (JPM.) The valuation that Capital One found appropriate in North Fork Bank just a few weeks ago, may have stirred BK into action.

If BK gets a NFB kind of a valuation on a premium paid for deposits, this would represent about $15 billion. This is a highly optimistic valuation but that was the going price for what I believe to be a less attractive, less established franchise.

There appears to be some discussion that certain branches, probably within Manhattan itself, would be excluded from the deal.

I believe that BK could engage in a fairly significant share buyback with the proceeds of such a sale. BK to date has done a relatively modest effort in share buybacks. In the last five years, only in 2005 was there a buyback of stock in excess of issuance. This amounted to a net buyback of merely $174 million, which compared to a market cap of $28 billion seems like a modest effort.

What will remain? Hopefully, this becomes a much more focused bank involved in security services and global processing. Perhaps, some multiple expansion will ensue as this becomes a wholly fee driven bank resembling Northern Trust (NTRS) or State Street Bank (STT) much higher return and higher multiple stocks.

With the almost 5% rise in the stock, is there much left on the table? In my view, if BK pulls off a NFB kind of a deal, the stock should see $40...combine that with a decent buyback of at least 10% of the stock and I think we could see mid $40's valuations.

I, my family, and my clients have a position in BK and do not currently own a position in COF, NFB, NTRS, or STT.