STT State Street Corporation

By Justin Baer 

State Street Corp. agreed to buy financial-data firm Charles River Systems Inc. for $2.6 billion in cash to deliver more data and analytic tools to its asset-management clients.

Charles River, a privately held firm based in Burlington, Mass., runs a software platform used by more than 300 customers. It had revenue of more than $300 million last year.

State Street plans to pay for the deal in part by canceling plans to buy back about $950 million in company stock this year. The firm said the transaction received a "conditional non-objection" from the Federal Reserve when it submitted its annual plan to return capital to shareholders, though the transaction will still need the Fed's approval.

State Street, which performs core administrative and accounting tasks for 86 of the world's largest 100 money managers, has looked to step out of those clients' back offices and onto their trading floors, where they can offer data, analytics and trading tools to investment staff. State Street estimates there is an $8 billion market for those tools.

The deal comes as State Street and other custody banks look to pull out of a yearslong rut of low revenue growth. The industry's biggest players, including State Street, have slashed expenses. Those cuts have helped lift earnings, but investors have been pining for firms such as State Street and Bank of New York Mellon Corp. to collect higher fees from its financial-services clients.

State Street announced the Charles River agreement minutes before it reported second-quarter net income of $698 million, or $1.88 a share. The profit figure marked a 20% increase from a year earlier, when the firm earned $584 million, or $1.53 a share.

Included in the latest results was a $77 million charge, or 17 cents a share, related to job cuts and management changes related to its continuing push to automate functions and eliminate expenses.

Analysts polled by S&P Global Market Intelligence had expected a per-share profit of $2.01.

Total revenue rose 7.7% to $3.03 billion. Fee revenue climbed 5.5% to $2.36 billion, driven in part by higher asset prices. The average analyst estimate was $3.05 billion, according to S&P Global.

State Street's shares fell $2.95, or 3.2%, to $92.74 in early trading.

Write to Justin Baer at justin.baer@wsj.com

(END) Dow Jones Newswires

July 20, 2018 07:52 ET (11:52 GMT)

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