STT State Street Corporation

By Austen Hufford 

State Street Corp. said revenue fell and expenses rose even as a tax credit helped boost profit in the quarter.

State Street shares fell 4.4% to $77 in premarket trading as The Wall Street Journal also reported Wednesday that J.P. Morgan Chase & Co. struck a deal to be the custodian for more than $1 trillion of BlackRock Inc.'s assets , poaching the business from State Street.

Earlier, the Boston-based trust bank reported earnings of $557 million, or $1.43 a share, down from $547 million, or $1.34 a share, a year ago. On an operating basis, earnings were $1.48 a share. Revenue fell 0.3% to $2.53 billion.

Analysts polled by Thomson Reuters had expected $1.32 a share in earnings on $2.78 billion in revenue.

Assets under custody and administration increased 4.6% to $28.77 trillion from a year prior, even as they fell 1.4% from the previous quarter. Assets under management increased 9.9% to $2.47 trillion and 0.9% from the third quarter.

The company said it had fourth-quarter net inflows of $16 billion and net outflows of $42 billion during the full year. Exchange-traded funds had $36 billion of fourth-quarter net inflows and $52 billion annual net inflows.

Fees, which represent nearly 80% of the bank's top line, fell 1.5% to $2.01 billion. Expenses increased 18% from a year earlier to $2.18 billion, on higher compensation costs.

During the quarter, the company took a charge of $249 million to change its deferred cash incentive compensation in order to remove a continued service requirement for its lower-level employees. State Street said this was done because the deferred portion of its employees' total compensation had become disproportionate relative to its competitors and it was hurting its ability to attract and retain top talent.

The company also took a tax-benefit charge of $145 million by designating some of its foreign earnings as "indefinitely" invested overseas.

Last year, State Street completed its $485 million acquisition of General Electric Co.'s asset-management unit.

Write to Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

January 25, 2017 09:06 ET (14:06 GMT)

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