Mercer Capital’s Asset Management Industry newsletter is a quarterly publication providing perspective on valuation issues pertinent to asset managers, trust companies, and investment consultants. Each issue includes a segment focus, market overview, mergers and acquisitions review, and more. Segments covered are mutual fund companies (1st quarter), traditional asset mangers (2nd quarter), alternative asset managers (3rd quarter), and trust banks (4th quarter).
The Q4 2012 issue segment focus is Trust Banks. Excerpting from the discussion of trust banks in the newsletter:
After several years of tepid returns on both an absolute and relative basis following the financial crisis of 2008, all three publicly traded trust banks domiciled in the U.S. outperformed the broader indices in 2012. Placing this recent comeback in its historical context reveals the headwinds these banks have been facing in a low interest rate environment that has significantly compressed their money market fees and fixed income yields. Their recent success may therefore be more indicative of a reversion to mean valuation levels following years of depressed performance rather than a sudden surge of investor optimism regarding their future prospects.
On the other hand, most interest rate sensitive businesses like trust banks have outperformed the S&P 500 in recent months, as a steepening of the yield curve could portend a rise in short term rates that would rehabilitate their money market revenue and reinvestment income. Conversely, a flattening of the yield curve or reduction in short term rates could check their recent momentum and send these stocks into correction territory….
To read the entire write up, download the newsletter (pdf) here.