Unsexy Banks Sail Through Crisis

NEW YORK (TheStreet) -- JPMorgan Chase(JPM Quote) gets a pat on the back for avoiding the credit calamity that has plagued its competitors. Investors have lowered their standards for financial services, even though other companies are less risky and offer solid performance.

Bank of New York Mellon(BK Quote) and State Street(STT Quote) skated through the crisis nearly unscathed because of their minimal exposure to the securities that caused the pain. These companies profit from the boring business of asset custody, so it's easy to overlook them in favor of firms with more sizzle, like Citigroup(C Quote), Goldman Sachs(GS Quote) and JPMorgan, whose investment banking divisions add rocket fuel to their earnings and risk profiles.

See inside State Street and Bank of New York Mellon's numbers. >

Custody banks are far from exciting, and they won't make good conversation topics at a dinner party, but they're stronger bets than the big-name banks. Bank of New York has generated an operating margin of 19% for the past 12 months, while State Street posted an impressive 32%. These numbers crush those of the investment banks that have seen revenues crumble amid capital market turmoil.

Bank of New York and State Street, which report third-quarter results tomorrow, benefit from the steady stream of income they get for providing services such as record keeping, performance analysis and trade execution. The stock has a forward price-to-earnings ratio of 12, compared with 27 for the industry.

These services haven't resulted in blockbuster share growth. Bank of New York's shares have fallen 2.2% this year, while State Street's have climbed 35%. Goldman Sachs shares have more than doubled, and JPMorgan stock has soared 49%.