State Street said first-quarter earnings rose 11 per cent 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 and Poor's 500 Index in the first quarter was 39 per cent higher than a year earlier, helping to increase the amount of money the company oversees and invests for clients. Revenue increased 4.4 per cent to $2.12 billion.
State Street's earnings a year ago were reduced by $31 million in dividends paid to the US 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 per cent to $880 million as assets under custody increased 24 per cent to $14.1 trillion. Investment-management fees rose 25 per cent to $226 million as assets under management increased 38 per cent 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 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.
Results were announced before the start of regular US trading. State Street has risen 8.5 per cent this year, compared with the 12 per cent gain for Standard and Poor's 15-member index of asset managers and custody banks.
Custody banks keep records, track performance and lend securities to institutional investors including mutual funds, pension funds and hedge funds. The company's money-management unit, State Street Global Advisors, operates mutual funds and investment accounts for institutions and wealthy individuals.
Bloomberg