Custody Banks Acquire Glamour -- WSJ
January 25 2018 - 3:02AM
Dow Jones News
By Justin Baer
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (January 25, 2018).
Wall Street's less glamorous players are suddenly among the
hottest stocks in the financial world.
Shares of custody banks State Street Corp. and Northern Trust
Corp. hit all-time closing highs this week, and a recent climb by
rival Bank of New York Mellon Corp. shares put its record within
striking distance.
The three companies have outperformed the S&P 500's 25% rise
over the past year. Two of them also beat the KBW Nasdaq Bank
Index's 29% rise; the third nearly matched it.
The custody banks are benefiting from a market rally that is
lifting assets they manage and fees they charge to provide
back-office services to corporate and investment-management
clients. They also say they are attracting new business. BNY Mellon
and State Street both pulled in net new client money during the
fourth quarter.
Many investors passed over these banks in early 2017 in favor of
financial stocks viewed as more direct beneficiaries of any U.S.
tax overhaul, said UBS analyst Brennan Hawken.
A market rally helped turn that around, he said, but investors
are also reacting to years of cost cuts, the promise of bigger
payouts to shareholders and a bet that U.S. regulators would
lighten the capital rules imposed on the largest banks.
"Markets are robust," Mr. Hawken said. "And as interest rates
rise, it benefits them. You also have an improved focus on expense
discipline."
The most recent evidence of a turnaround came Wednesday as
Northern Trust reported fourth-quarter net income, excluding
certain charges, of $1.32 a share, according to Credit Suisse Group
AG analysts. On that basis, the firm earned $1.11 a share a year
earlier.
Revenue climbed 15% to $1.43 billion. The Chicago bank also beat
Wall Street's expectations. Assets under custody totaled $8.05
trillion at year-end, up 20% from a year earlier, while assets
under management rose 23% to $1.2 trillion. The company's
fourth-quarter results also benefited from an acquisition of a UBS
servicing business.
Northern Trust's shares are up 28% in the past 12 months to
$106.17.
Earlier this week, State Street reported a fourth-quarter profit
of $1.83 a share, excluding charges associated with the U.S. tax
overhaul, up 24% from a year earlier. Revenue rose 8.5% to $2.98
billion. Both profit and revenue figures exceeded the estimates of
analysts polled by S&P Global Market Intelligence.
State Street closed 2017 with a record $33.1 trillion in assets
under custody and administration; assets at its money-management
arm rose to $2.8 trillion.
Its shares are up 43% in the past year to $112.71.
BNY Mellon last week reported a profit of 91 cents a share,
excluding gains from the tax measure and certain charges, matching
analysts' average estimates. Revenue totaled about $4 billion,
excluding the impact of the new tax rules, up from $3.8 billion a
year earlier.
Assets under custody jumped to a record $33.3 trillion at the
close of 2017, while assets under management also hit a new high,
at $1.9 trillion.
BNY Mellon's shares are up 32% in the past year to $57.77,
nearing its all-time high of $62.81. The stock hit that mark in
November 2000.
Write to Justin Baer at justin.baer@wsj.com
(END) Dow Jones Newswires
January 25, 2018 02:47 ET (07:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Bank of New York Mellon (NYSE:BK)
Historical Stock Chart
From Aug 2024 to Sep 2024
Bank of New York Mellon (NYSE:BK)
Historical Stock Chart
From Sep 2023 to Sep 2024