Shift To Safety, Lower Volumes Hit State Street Foreign Exchange Revenues
January 18 2012 - 11:02AM
Dow Jones News
Lower market volumes and investors' preferences for safer assets
drove down State Street Corp.'s (STT) foreign exchange trading
revenues in 2011.
The uncertain global economic backdrop, including the euro-zone
sovereign debt crisis, triggered a decline in capital markets'
trading volume, which in turn hit State Street's trading revenues,
executives from the bank said Wednesday.
The environment in the second half of 2011 "significantly
affected investor confidence," said the firm's chief executive
officer Joseph Hooley in a fourth-quarter earnings call
Wednesday.
Foreign-exchange trading revenues fell 12% in 2011 from the
previous year as investors shed riskier assets from their
portfolios. In the fourth quarter, currency trading revenues of
$150 million fell 26% from the previous quarter, due primarily to
weaker volumes and lower market volatility, the firm said.
The move to more conservative asset classes resulted in lower
revenues for trading services overall for the firm, said chief
financial officer Edward Resch.
Trading services revenue, which includes foreign exchange
trading and brokerage and other fees, was $273 million in the
fourth quarter, down 18% from $334 million in the third quarter of
2011.
"Investors reacted to these worldwide economic events by
adjusting" their portfolio mix, primarily to cash and fixed income
from higher risk assets, he said. "We have seen investors become
more risk averse due to the uncertainty in Europe."
-By Erin McCarthy, Dow Jones Newswires; 212-416-2712;
erin.mccarthy@dowjones.com @djfxtrader
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