Quarter-End Insights

Financial Services: Regulations and Interest Rates Remain in the Spotlight for 2018

Michael Wong, CFA, CPA
  • We assess the global financial-services sector as fairly valued. It has recently traded at a market-cap-weighted price/fair value estimate ratio of 1.04--a 4% premium to what our analysts believe the sector is worth.
  • The near- to medium-term earnings growth of many financials will be based on how much additional income financial companies generate from higher interest rates compared with increases in funding costs.
  • For asset managers, wealth management firms, and life insurance companies, regulation and competition is leading to business model changes and mergers. Fiduciary regulations are increasing scrutiny on distribution strategies and the scale needed to compete.

Michael Wong, CFA, CPA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.