State Street Fee Revenue Drops on Weaker Market Conditions
July 27 2016 - 10:00AM
Dow Jones News
State Street Corp. reported a decline in revenue in its second
quarter as weaker markets hurt fees generated by the trust bank,
though its profit increased on lower expenses.
The Boston-based bank reported earnings of $619 million, or
$1.47 a share, up from $418 million, or 93 cents a share, a year
ago. Excluding certain one-time items, its per-share profit was
$1.46.
Revenue declined 1.3% to $2.57 billion.
Analysts projected $1.26 in adjusted per-share earnings on $2.65
billion in revenue, according to Thomson Reuters.
Chief Executive Joseph Hooley said State Street still views the
European investment market as a significant opportunity even after
the recent U.K. Brexit vote to exit the European Union. Mr. Hooley
said State Street expects lower interest rates for longer but its
long-term outlook for its European operations remain unchanged.
Assets under custody and administration declined 3% to $27.79
trillion and assets under management dropped 3.1% to $2.3 trillion
from a year ago.
State Street completed its $485 million acquisition of General
Electric Co.'s asset-management unit during the quarter.
The results come a day after State Street said it agreed to pay
about $530 million to clear a number of lawsuits alleging the
custody bank had overcharged clients on foreign-currency
transactions. The suits had accused State Street of promising to
execute foreign-exchange trades at market price. In reality, they
alleged, the bank instead used rates that included hidden
markups.
In the quarter, revenue from indirect foreign exchange trading
fell 11% to $70 million from the year prior.
Lower assets, domestic and international market declines and
lower foreign exchange trading volumes cut into fee revenue.
Servicing fees declined 6.1% and management fees fell 3.6% from a
year earlier. Fees overall, which represent 80% of the bank's top
line, slipped to $2.05 billion, down 1.1% from a year before.
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. Total expenses fell 13%
from a year earlier to $1.86 billion, as the prior year's expenses
had a $250 million provision for legal fees.
State Street shares, down 8.8% in the past three months, were
inactive premarket.
Write to Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
July 27, 2016 09:45 ET (13:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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