State Street Corporation (NYSE:STT) reported that it has been selected to provide investment operation outsourcing services to Alliance Bernstein, PIMCO and Sweden’s Lansforsakringar Fondforvaltning AB in three separate contracts. Additionally, the company is eager to expand in Europe should acquisition opportunities present themselves. Further international expansion will allow the company to bolster its position as a leading global provider of financial services to institutional clients, a market in which it competes with BlackRock Inc. (NYSE:BLK) and BNY Mellon (NYSE:BK).
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Alliance Bernstein has selected State Street to service its Asian and Australian operations, valued at over $300 billion.  Building on the companies’ longstanding relationship, State Street will offer services ranging from trade settlement, portfolio administration and reconciliation to client reporting, and performance management. Meanwhile, the strong performance record of Global Equity Spotlight Strategy got State Street Global Advisors, the company’s investment management arm, a €111 million equity mandate from Sweden’s Lansforsakringar Fondforvaltning  while PIMCO decided to retain State Street’s operations outsourcing services for $1.3 trillion in assets.  We believe that these developments demonstrate that the company is well-positioned to face the current market uncertainty by staying focused on its client base.
In its attempt to expand and benefit from the chaos in the European financial sector, the company is looking for favorable acquisition opportunities on the other side of the Atlantic.  The company also plans to request a share repurchase plan next year, aiming at a 20% to 25% payout ratio.
We are reviewing our price estimate for State Street, currently at $46, to reflect third quarter earnings and market conditions. The current estimate is about 15% ahead of the market price.Notes:
- State Street to Provide Investment Operations Outsourcing Services to AllianceBernstein for More Than $300 billion in Assets, MarketWatch [↩]
- State Street Global Advisors Awarded EUR111 Million Equity Mandate from Lansforsakringar Fondforvaltning AB, Affarsenhet Bank, MarketWatch [↩]
- State Street Renews Mandate with PIMCO for $1.3 Trillion in Assets, MarketWatch [↩]
- State Street ready for M&A in Europe, Reuters [↩]