State Street Poised For a Strong 2018
While we expect fee growth to moderate over the longer term, the wide-moat firm should hit a return on equity just over 16% longer term, post tax reform.
Wide-moat-rated
ETF growth was a strong contributor to growth in assets under management, and management stated that roughly $5 billion in inflows occurred for their new low-cost ETF line up. While we don’t expect institutional clients to necessarily flock to these new ETFs, away from the pre-existing Spyder ETFs which may cost more but have more lilquidity, we do expect the offering to have an improved draw for retail clients. Related to this, State Street’s partnering with TD Ameritrade as a platform for these ETFs shows the bank’s commitment to trying to maintain better share within the space. We expect this should lead to decreased asset yields overall as State Street has finally truly entered into the fee war battle, but the resulting growth should be a net positive for the firm.
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