STT State Street Corporation

NASDAQ

Profit Surges, Led by Market Services

Nasdaq Inc. said first-quarter profit surged as revenue increased across all segments, led by the market-services division.

The bottom line beat Wall Street expectations.

Nasdaq has transformed itself from a U.S.-focused exchange operator to a global business-services company that includes markets in the U.S., Canada and the Nordic region, as well as investor, public-relations, technology and data services. In the quarter it closed deals to buy Chi-X Canada, an alternative trading system for the Toronto Stock Exchange, and news-release distributor Marketwired. The financial terms of those deals weren't disclosed.

Nasdaq reported profit of $132 million, or 78 cents a share, for the quarter, up from $9 million, or five cents a share, a year earlier. Excluding restructuring- and acquisition-related charges and other items, per-share earnings rose to 91 cents.

Revenue increased 5.3% to $534 million. Analysts polled by Thomson Reuters expected a per-share profit of 89 cents on revenue of $535 million.

Chris Allen, an analyst at UBS AG, said in a research note that he expected the "solid results" would positively impact Nasdaq share price today.

Market-services revenue, which contributed 38% of the exchange's top line, increased 6.9% to $201 million on higher trading volumes. Exchanges benefit more from periods of heightened trading and volatility because the more people trade, the more fees they collect on transactions.

The company's information-services segment, which represented 25% of the top line, reported revenue increased 6.4% to $133 million, on higher revenue from index data and proprietary data, and from an acquisition.

One area of weakness was the company's technology solutions, which saw operating margins decline to 12% from 21%, according to Daniel Fannon, an analyst at Jefferies Group LLC. Technology solutions, including exchange technology for operators around the world and compliance surveillance software, accounts for about a quarter of Nasdaq's revenues.

The Marketwired acquisition and growth in surveillance products drove a 3.1% revenue increase to $134 million in the technology solutions segment.

Despite a moribund market for initial public offerings in the quarter, Nasdaq said all 10 U.S. IPOs listed on its exchange. The period was the slowest since the first quarter of 2009, both in terms of number of deals and total money raised, according to data provider Dealogic.

Listing services revenue increased 3.1% to $66 million.

--Austen Hufford

STATE STREET

Drop in Fee Income Spurs Earnings Fall

State Street Corp. reported a decline in earnings and revenue for the first quarter as weaker global markets dented the fees generated by the trust bank.

Boston-based State Street reported earnings of $319 million, or 79 cents a share, down from $373 million, or 89 cents a share, a year earlier. Excluding certain items, per-share profit fell to 98 cents from $1.16. Revenue declined 4.5% to $2.48 billion. Analysts projected 90 cents in per-share earnings on $2.56 billion in revenue, according to Thomson Reuters.

Chief Executive Joseph Hooley said fee revenue was hurt by a challenging market environment, especially at the beginning of the year, but added he was encouraged by signs of stability in March.

Assets under custody and administration declined 5.4% to $26.94 trillion, and assets under management dropped 6% to $2.3 trillion from a year before.

Lower assets, the market decline and the stronger dollar also cut into fee revenue, with servicing fees declining 2.1% and management fees falling 10%. Fees, which represent most of the bank's top line, slipped 4.1% to $1.97 billion 4.1% from a year earlier and 3.6% sequentially.

In recent quarters State Street has focused on managing expenses. Late last year, the bank said it was accelerating its cost-cutting plan as it grappled with a challenging environment. It said Wednesday that layoffs and other measures announced in the third quarter are on track to result in about $100 million in cost savings this year. Total expenses in the first quarter fell 2.2% from a year earlier to $2.05 billion.

--Austen Hufford

(END) Dow Jones Newswires

April 28, 2016 02:47 ET (06:47 GMT)

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