2 Banks to Benefit the Most From a Steeper Yield Curve

State Street's fourth-quarter net interest margin was 1.36%, contracting from 1.44% the previous quarter and 1.4% a year earlier. The company reported tax-adjusted fourth-quarter net interest revenue -- excluding "conduit-related discount accretion" -- of $600 million, declining from $611 million in the third quarter, but increasing from $577 million year earlier. Mosby estimates that if the yield curve were to steepen by 1 percentage point, State Street's net interest margin would expand by 36 basis points to 1.66%.

Mosby rates Wells Fargo a "buy," with a price target of $46.50, and estimates the company will earn $3.90 a share this year, with EPS increasing to $4.30 in 2014.

The analyst has a "neutral" rating on State Street, with a $57 price target, and estimates the company will earn $4.50 a share this year and $5 a share in 2014.

-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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