Core Viewpoint - The Federal Open Market Committee (FOMC) has decided to pause interest rate cuts, maintaining rates between 3.50% and 3.75%, which may benefit certain financial stocks, particularly custody banks like BNY Mellon and State Street [1][2]. Group 1: FOMC Decision and Market Expectations - The FOMC's decision to hold rates was anticipated, with expectations that rates will remain stable until at least the June 16-17 meeting [2]. - Lower interest rates typically favor technology and growth stocks, but some financial stocks, particularly custody banks, may prefer rates to remain steady or even increase [2]. Group 2: Custody Banks Overview - BNY Mellon and State Street are leading custody banks, managing significant assets: BNY Mellon oversees $59.3 trillion, while State Street manages $53.8 trillion [4]. - These banks primarily generate revenue from servicing fees, with BNY Mellon earning approximately 70% of its $5.2 billion in fees and State Street about 75% of its $3.7 billion in fees in the fourth quarter [5]. Group 3: Revenue Sources and Interest Income - A portion of revenue for both banks comes from net interest income, with BNY Mellon earning around $1.35 billion and State Street $802 million last quarter [6]. - Higher interest rates lead to increased net interest margins for these banks, making them less sensitive to interest rate changes and competition, thus viewed as stable investments in a high-rate environment [7]. Group 4: Stock Performance and Analyst Ratings - Following the FOMC decision, State Street's stock rose approximately 2.5% to around $131 per share, while BNY Mellon's shares increased about 2% to $121 per share [8]. - Analysts consider both stocks as buys, with State Street having a median price target of $145 per share (11% upside) and BNY Mellon at $136 per share (13% return) [9].