By Melodie Warner
State Street Corp.'s (STT) third-quarter earnings rose 21%,
bolstered by a gain, as revenue declined more than expected.
"Our third-quarter results reflect continued resilience across
both asset servicing and asset management, partially offset by
weakness in trading services," said Chairman and Chief Executive
Joseph L. Hooley. "Although equity markets have improved, clients
remain conservative in their investment allocations which adversely
affects our revenue."
State Street is one of the country's largest trust banks, acting
as a custodian for investment firms' securities and handling other
back-office duties. Like many financial firms, the company's top
and bottom lines have been pressured by historically low interest
rates and declining trading volumes.
State Street has taken cost-control measures, such as
withdrawing from its fixed-income-trading initiative and making
targeted staff reductions. It also completed its $550 million
acquisition of Goldman Sachs Group Inc.'s (GS) hedge-fund
administration business on Monday, a deal that makes State Street
the biggest manager of behind-the-scenes activities for hedge
funds, such as tax reporting and accounting.
State Street reported a profit of $674 million, or $1.36 a
share, up from $555 million, or $1.10 a share, a year earlier. The
most-recent quarter included a gain of 35 cents a share, primarily
for claims associated with the 2008 Lehman Brothers bankruptcy.
Adjusted per-share earnings rose to 99 cents from 96 cents.
Revenue dropped 2.9% to $2.36 billion.
Analysts polled by Thomson Reuters had most recently forecast
earnings of 96 cents on revenue of $2.37 billion.
Servicing fees were down 0.5% to $1.1 billion.
Trading-services revenue, which includes foreign-exchange
trading revenue and brokerage and other fees, declined 31% to $232
million. Foreign-exchange trading revenue decreased 44%, while
brokerage and other fees were down 10%.
Securities finance revenue jumped 7.1% to $91 million.
Total assets under management as of at Sept. 30, were $2.065
trillion, up 11% from $1.855 trillion a year ago.
Shares closed Monday at $41.58 and were inactive premarket. The
stock has risen 3.2% so far this year.
Write to Melodie Warner at melodie.warner@dowjones.com