Custody, management fees boost State Street’s earnings
It's a solid start for new State Street boss Jay Hooley. Custody fees at the company were up 15% in the first quarter of the year, while investment management fees rose by more than a quarter
State Street Corp., the second- largest independent custody bank, said first-quarter earnings rose 11 percent as recovering markets boosted the assets it safeguards and invests for customers.
Net income increased to $495 million, or 99 cents a share, from $445 million, or $1.02, a year ago, when there were fewer shares outstanding, the Boston-based company said in a statement today. Excluding some items, profit matched the 75-cent-a-share average estimate of 16 analysts surveyed by Bloomberg.
The average value of the Standard & Poor’s 500 Index in the first quarter was 39 percent higher than a year earlier, helping to increase the amount of money the company oversees and invests for clients. Revenue increased 4.4 percent to $2.12 billion.
State Street’s earnings a year ago were reduced by $31 million in dividends paid to the U.S. government’s bank rescue fund. The bank sold $2 billion of preferred shares to the Treasury Department in October 2008 as part of the Troubled Asset Relief Program. It repurchased the shares in June.
Custody fees rose 15 percent to $880 million as assets under custody increased 24 percent to $14.1 trillion. Investment-management fees at State Street Global Advisors rose 25 percent to $226 million as assets under management increased 38 percent to $1.93 trillion.
Net income included $212 million from the sale or maturing at full value of fixed-income securities that were written down last year to reflect depressed market prices. State Street doesn’t include the item in its operating income and most analysts excluded it from their profit estimates.
The company recorded a $3.7 billion after-tax loss in May 2009 when it lowered the value of holdings in its four commercial-paper programs, or conduits, to reflect market prices. Ronald E. Logue, State Street’s former chief executive officer, said at the time he expected the bank to recover most of the loss as the securities matured or were sold at face value over the next eight years.
Logue, CEO since June 2004, retired March 1 and was replaced by Joseph “Jay” Hooley, formerly the chief operating officer.
Results were announced before the start of regular U.S. trading. State Street has risen 8.5 percent this year, compared with the 12 percent gain for Standard & Poor’s 15-member index of asset managers and custody banks.
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