Custody Banks Like State Street and BNY Mellon Are Quietly Near Record Highs. Here's What's Driving the Rally.
These banks don't depend as much on favorable interest rates.
Overview
Banks have rallied during the past few months, lifting the KBW Nasdaq Bank Index, which tracks the largest U.S. bank stocks, more than 12% so far this year.
But there is one often overlooked sector of the banking industry that has outperformed considerably: custody banks. These are not like traditional banks that lend to consumers and businesses. They hold and service huge amounts of institutional assets -- such as mutual funds, pensions, exchange-traded funds (ETFs), stocks and other investments, real estate, cash, hedge funds, endowments, and 401(k)s -- all from large institutions.
Details
They collect fees on these assets for servicing and holding them -- and those fees rise as the asset totals increase.
Source
Originally published at www.fool.com.