State Street’s move to buy the asset management business of General Electric will expand its own assets under management by about 5%. At the same time, the financial services firm is streamlining its operations to cut costs.
STATE STREET CORP. (New York symbol STT; www.statestreet.com) sells accounting and administrative services to large institutional investors such as mutual funds and pension plans.
State Street recently agreed to buy General Electric’s asset management business for $485 million. This operation manages pension plans and other portfolios for over 100 institutional investors.
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The purchase will add $100 billion to the company’s $2.3 trillion in assets under management (as of March 31, 2016). Its income rises and falls with the value of the mutual funds and other securities it manages.
In addition, State Street is currently restructuring its operations by cutting jobs and outsourcing some of its computer systems. The plan should cut $100 million from its annual costs by the end of 2016.
These factors should increase its 2016 earnings per share by 6.5%, to $4.76. The stock trades at a low 12.2 times that forecast. The $1.36 dividend yields 2.3%.
The company provides specialized services to banks and other large financial institutions. Long-term relationships with its clients make it difficult for new competitors to enter its market.
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STT seems to be one of those stocks that few self-directed investors track. It flies under the radar.
State Street should also benefit as more banks outsource their back office functions. Thanks for the update.
I’ve known about it for years, Beryl, and kept a hold of it for years.
State Street is one stock that I was considering before. This has helped me to make up my mind. Thank you, Jim.