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Custody Banks: Financial Losers

NEW YORK ( TheStreet) -- Bank of New York Mellon (BK - Get Report) and State Street (STT - Get Report) were the losers among major U.S. financial names on Wednesday, with shares of both custody banks sliding over 3%.

Shares of Bank of New York Mellon closed at $20.57 and State Street closed at $39.91.

The broad indexes saw 1% gains after Apple's (AAPL) blowout quarter.

The The KBW Bank Index (I:BKX) rose slightly, to close at 43.53, after the Federal Reserve Open Market Committee issued a statement indicating that it would keep the federal funds rate near zero "at least through late 2014."

After Bank of New York Mellon last Wednesday announced fourth-quarter earnings of $505 million, or 42 cents a share, declining from $54 cents a share in the third quarter and 53 cents a share during the fourth quarter of 2010, Guggenheim Securities analyst Marty Mosby reiterated his "Buy" rating on the company's shares, saying that the "results reflected the full impact from this low interest rate environment and the preference of investors to de-risk their positions."

Mosby added that "The inability to continue to grow earnings in this operating environment has pushed BK's price to earnings ratio to historically low levels" to forward earnings estimates, but that he expected "efficiency initiatives, a stable net interest margin, an acceleration in share repurchases, and a return of investor confidence to help produce at least 10% EPS growth in 2012."

The analyst also believes that after the Federal Reserve completes its latest round of stress tests in March, Bank of New York could raise its dividend yield to 3.5%.

The shares trade for nine times the consensus 2012 earnings estimate of $2.26 a share, among analysts polled by FactSet.

Interested in more on Bank of New York Mellon? See TheStreet Ratings' report card for this stock.

Following State Street's announcement on Monday of fourth-quarter operating earnings of 93 cents a share, declining from 96 cents during the third quarter and a dollar during the fourth quarter of 2010, Marty Mosby reiterated his "Buy" rating for the stock, saying that he believes "that as the operating environment stabilizes in 2012 , revenue growth returns, positive efficiencies begin to build, and share repurchases continued to lower outstanding shares, STT should be able to grow operating earnings per share by at least 10%."
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BK $43.91 -0.05%
HCBK $10.12 -0.69%
STT $72.76 -0.08%
AAPL $117.97 -0.05%
FB $105.42 0.01%


Chart of I:DJI
DOW 17,815.43 +2.04 0.01%
S&P 500 2,091.39 +2.52 0.12%
NASDAQ 5,128.7440 +12.6010 0.25%

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