Citi Reiterates Its Buy Rating on Custody Banks (BK, STT, NTRS)

Citi reiterates its Buy rating on The Bank of New York Mellon Corporation BK, State Street Corp. STT, and Northern Trust Corp. NTRS. In a note to clients, Citi writes, "We believe investors have taken into account the high asset sensitivity of the custody banks but believe investors are overestimating the negative impact should rates remain low for a prolonged amount of time. In our recent ALCO analysis (U.S. Banks: ALCO Analysis - Comparing Interest Rate Risk Across the Sector) we identified 4 “levers” custody banks could use to mitigate an extended period of low interest rates. All 3 performed well in the analysis with securities portfolio flexibility and liquidity as the main positives. STT is best positioned for an extended low rate environment while BK is best positioned for rising rates. NTRS is asset sensitive and we believe most of the negative impact from low rates is reflected in the margin. NTRS closed Friday at $55.88, up 0.68% from Thursday's close. STT closed Friday at $49.99, up 2.92% from Thursday's close. BK closed Friday at $32.37, up 2.31 from Thursday's close.