By Melodie Warner
State Street Corp.'s (STT) second-quarter earnings rose 19% as
the trust bank collected more servicing and management fees.
State Street, one of the country's largest trust banks, has
taken a hard line on expenses despite improving business trends.
The company's cost-control measures have included withdrawing from
its fixed-income-trading initiative and staff cuts, actions it has
said will better align expenses with its 2013 business outlook.
State Street also bought Goldman Sachs Group Inc.'s (GS)
hedge-fund administration business for $550 million in October, 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 $571 million, or $1.24 a
share, up from $480 million, or 98 cents a share, a year earlier.
Excluding items such as equity-incentive-compensation expense,
adjusted per-share earnings rose to $1.24 from $1.01. Revenue
jumped 5.8% to $2.56 billion.
Analysts polled by Thomson Reuters had most recently forecast
earnings of $1.19 a share on revenue of $2.54 billion.
Servicing fees rose 11% to $1.2 billion. Trading-services
revenue, which includes foreign-exchange trading revenue and
brokerage and other fees, declined 0.8% to $125 million.
Management fees increased 13% to $277 million and
securities-finance revenue dropped 8.4% to $131 million.
Assets under management as of June 30, rose 12% to $2.146
trillion from $1.908 trillion a year before while assets under
custody and administration increased 15% to $25.742 trillion from
$22.423 trillion.
Moody's Investors Service recently placed State Street's A1
investment-grade rating on review for a possible downgrade because
of profitability challenges from aggressive pricing of its core
custody products and services. The credit ratings company is also
reviewing its long-term debt ratings for rival trust and custody
banks Bank of New York Mellon Corp. (BK) and Northern Trust Corp.
(NTRS).
On Wednesday, Bank of New York Mellon reported its
second-quarter earnings rose 81% with the help of an equity
investment gain and a 14% rise in fee revenue. Meanwhile, Northern
Trust's second-quarter profit rose 6.4% as higher fees helped
offset weaker net interest income.
State Street shares closed Thursday at $70.10 and were inactive
premarket. The stock has risen 49% so far this year.
Write to Melodie Warner at melodie.warner@dowjones.com
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