State Street Corporation (STT), The Bank of New York Mellon Corporation (BK), Northern Trust Corporation (NTRS): Should You Trust This Trust Bank With Your Money?

The distinguishing factor that separates Northern Trust Corporation (NASDAQ:NTRS) from its peers is its wealth management business, which accounts for about a quarter of its revenue. Northern Trust Corporation (NASDAQ:NTRS) doubled its assets under management from high net worth individuals from under $100 billion in 2001 to close to $200 billion in 2012. This is a result of Northern Trust’s ability to provide its wealthy clients with a range of complementary services such as tax planning, brokerage services, private banking services, and trust and estate services. In recent months, Northern Trust Corporation (NASDAQ:NTRS) also extended its reach in Europe and Asia-Pacific, with new offices and expanded services.

State Street has the highest ROE of 10.3% in the peer group, but it trades at a discount to Northern Trust Corporation (NASDAQ:NTRS) with a P/B of 1.4. In contrast, Northern Trust delivered a ROE of 9.3%, but is valued at 1.8 times P/B.

Conclusion

State Street is the purest proxy for increased demand for outsourced asset servicing services for alternative asset managers. It should trade at least at parity to its peer Northern Trust, given its superior ROE and more focused business.

The article Should You Trust This Trust Bank With Your Money? originally appeared on Fool.com and is written by Mark Lin.

Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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