By Chelsey Dulaney
State Street Corp. on Friday reported results for its second
quarter that met expectations despite a low appetite for risk,
while announcing yet another addition to its legal reserves for
currency-related claims.
State Street said it booked $156 million in charges to increase
its legal accrual related to foreign-exchange. State Street made a
similar addition in the first quarter.
In the latest quarter, State Street's results were weighed by
low interest rates and big market disruptions.
"Toward the end of the second quarter of 2015 we saw a number of
significant market disruptions, including the possibility of Greece
exiting the eurozone and elevated equity market volatility in
China, all of which drove markets down in June and reduced risk
appetite," Chief Executive Joseph Hooley said.
In all, State Street reported earnings of $393 million, down
from $602 million a year earlier. On a per-share basis, earnings
fell to 94 cents from $1.38 a share a year earlier.
On an operating basis, which excludes the legal accrual and
other items, per-share earnings fell to $1.37 a share from $1.39 a
share a year earlier. Revenue grew to $2.73 billion from $2.68
billion a year earlier. Revenue grew 2.1% to $2.73 billion.
Analysts polled by Thomson Reuters estimated an operating profit
of $1.37 a share and revenue of $2.73 billion.
Net interest revenue fell 4.6% to $535 million, pressured by low
interest rates.
Assets under custody and administration edged up 0.9% to $28.7
trillion while assets under management fell 4.3% to $2.37
trillion.
In State Street's trading-services business, revenue grew 8.1%
to $281 million, driven by a 16% jump in foreign-exchange
trading.
Monetary policies abroad and diverging interest rate
expectations for the U.S. relative to most other economies have
helped drive up foreign-exchange trading volume for the bank
recently.
State Street noted that though the strengthening of the U.S.
dollar reduced its fee revenue outside of the U.S., expense cuts
helped mitigate the impact to the bottom line.
Total fee revenue edged up 3.7% to $2.18 billion in the
quarter.
In June, State Street disclosed that it could face a civil
enforcement action from the U.S. Securities and Exchange
Commission, accusing the bank of violating securities law tied to
its use of consultants.
That came after State Street warned in May that it may be
required by a written agreement to improve its compliance
procedures after deficiencies were found related to the Bank
Secrecy Act, anti-money-laundering regulations and U.S. economic
sanctions regulations.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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