Custodian bank State Street Corp. (STT) reported Friday a profit for the first quarter that grew from last year, reflecting fee revenue growth amid stronger global equity markets. Adjusted earnings per share topped analysts' expectations, while quarterly revenues missed their estimates.
Looking ahead, the company said it continue to remain cautious for 2013, citing the ongoing fragile state of the global markets, despite signs of gradual improvement.
"The first-quarter results reflect good performance and our continued commitment to delivering value-added solutions to our clients across our asset servicing and asset management businesses. The strength in the equity markets, combined with higher volumes and increased volatility in foreign-exchange trading, supported our fee revenue," Chairman, President and CEO Joseph Hooley said.
Boston, Massachusetts-based State Street reported net income available to common shareholders of $455 million or $0.98 per share for the first quarter, higher than $417 million or $0.85 per share in the prior-year quarter, but lower than $468 million or $1 per share in the fourth quarter.
On an operating basis, net income for the quarter was $443 million or $0.96 per share, compared to $410 million or $0.84 per share in the year-ago quarter.
On average, 21 analysts polled by Thomson Reuters expected the company to report earnings of $0.93 per share for the quarter. Analysts' estimates typically exclude special items.
State Street's total revenues for the quarter increased 1 percent to $2.44 billion from the previous year. On an operating basis, revenues grew 2 percent to $2.47 billion from $2.42 billion in the same quarter last year, but missed fourteen Wall Street analysts' consensus estimate of $2.48 billion by a whisker.
Total servicing fee revenue for the quarter grew 9 percent to $1.18 billion. Meanwhile, net interest revenue declined 4.9 percent to $607 million, and also decreased 4.9 percent to $577 million on an operating basis, with net interest margin declining 21 basis points to 1.31 percent.
The company also said it achieved positive operating leverage of 130 basis points compared to the first quarter of 2012.
The company noted that it continues to control expenses across the organization and generate benefits from its transformation program, which helped it achieve positive operating leverage.
Total assets under custody and administration as at the end of the first quarter was $25.42 trillion, up 9.5 percent from $23.21 trillion at the end of the year-ago quarter. Assets under management also increased 9.9 percent to $2.18 trillion from $1.98 trillion last year.
Return on average common shareholders' equity was 8.9 percent, up from 8.6 percent in the year-ago quarter.
Further, State Street's board of directors approved a $2.1 billion common stock purchase program following the Federal Reserve's 2013 Comprehensive Capital Analysis and Review (CCAR) process,
The company also increased its common stock dividend by $0.02 to $0.26 per share during the quarter.
"Overall, the environment continues to show signs of gradual improvement as reflected by investors shifting into equities. However, given the ongoing fragile state of the global markets, we continue to remain cautious for 2013," Hooley added.
STT closed Thursday's regular trading session at $56.51, down $0.94 on a volume of 3.46 million shares. In the past 52-week period, the stock has been trading in a range of $38.95 to $60.78.
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