Custodian bank State Street Corp. (STT) reported Tuesday an adjusted profit for the third quarter that grew 14 percent from last year, with adjusted earnings per share topping analysts' expectations by a penny. The results were driven by double-digit growth in asset management and servicing fee.
The company noted that demand for its products, services, and solutions remained strong, which led to $200 billion of new asset servicing wins during the quarter.
"Our results reflect the strength of our core business with operating-basis fee revenue up 9% from the third quarter of 2012, in a period impacted by the cyclical declines in market-driven revenue from a summer slowdown as well as the effect of the low interest-rate environment," Chairman, President and CEO Joseph Hooley said in a statement.
Boston, Massachusetts-based State Street reported net income available to common shareholders of $531 million or $1.17 per share for the third quarter, which included $0.35 per share benefit primarily related to recoveries associated with the 2008 Lehman Brothers bankruptcy.
On an operating basis, net income for the quarter was $537 million or $1.19 per share, compared to $473 million or $0.99 per share in the year-ago quarter.
On average, 20 analysts polled by Thomson Reuters expected the company to report earnings of $1.18 per share for the quarter. Analysts' estimates typically exclude special items.
State Street's total revenues for the quarter increased to $2.43 billion from the previous year's $2.36 billion. On an operating basis, revenues were $2.47 billion, compared to $2.39 billion in the same quarter last year. Fifteen Wall Street analysts had a consensus revenue estimate of $2.51 billion for the quarter.
Total servicing fee revenue grew 10.1 percent to $1.21 billion from last year, primarily due to stronger global equity markets, the acquisition of the Goldman Sachs Administration Services business and net new business.
Foreign-exchange trading revenue surged 27.8 percent to $147 million, while brokerage and other fees declined 6.8 percent to $109 million. Total trading services revenue rose 10.3 percent to $256 million from a year ago.
Meanwhile, net interest revenue declined 9.5 percent to $553 million, with net interest margin declining 127 basis points to 1.31 percent from last year.
State Street said it achieved positive operating leverage of 206 basis points compared to the same quarter last year, driven by continued focus on controlling expenses across the organization.
Total assets under custody and administration as at the end of the third quarter was $26.03 trillion, up 11.1 percent from $23.44 trillion at the end of the year-ago quarter. Assets under management also increased 8.5 percent to $2.24 trillion from $2.07 trillion last year.
On an operating-basis, return on average common shareholders' equity was 11.0 percent, up from 9.6 percent in the year-ago quarter.
Looking ahead, State Street said its Business Operations and Information Technology Transformation program is on track to achieve total incremental estimated pre-tax expense savings of about $220 million in 2013.
STT closed Monday's regular trading session at $69.81, down $0.01 on a volume of 1.38 million shares. In the past 52-week period, the stock has been trading in a range of $43.60 to $71.27.
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