Custodial bank and asset manager State Street Corp. (STT) reported Wednesday a profit for the fourth quarter that more-than-doubled from last year, despite a 15% decline in quarterly revenues. However, on operating basis, earnings per share for the quarter dropped 37%, yet topped analysts' expectations by two cents. Following the announcement, the company's stock is trading up nearly 6%.
The Boston, Massachusetts-based company reported net income of $498 million or $1.00 per share for the fourth quarter, up from $234 million or $0.54 per share in the prior-year quarter.
The year-ago quarter results included net pre-tax negative tax effects of $723 million or $1.04 per share.
Excluding these items, net income, on an operating-basis, dropped to $492 million or $0.99 per share $680 million or $1.58 per share in the year-ago quarter. On average, 17 analysts polled by Thomson Reuters expected the company to earn $0.97 per share for the fourth quarter. Analysts' estimate typically excludes special items.
Total revenues for the quarter declined 15% to $2.28 billion from $2.67 billion in the same quarter last year. Operating-basis revenue decreased 12.5% to $2.31 billion from $2.64 billion in the prior-year quarter. Ten analysts had a consensus revenue estimate of $2.17 billion for the quarter.
Total fee revenue for the quarter slipped 19% to $1.53 billion from $1.88 billion, while net interest revenue was $697 million, down 17% from $843 million in the year-ago quarter. Net interest revenue, on an operating-basis, was $729 million, down 10% from $811 million in the year-ago quarter.
Servicing fees for the fourth quarter increased 5% to $882 million from $842 million in the year-ago quarter, due primarily to increase in daily average equity valuations and new business.
Investment management fees, generated by State Street Global Advisers, totaled $231 million, up 11% from $209 million in the prior-year quarter, largely due to increase in average month-end equity valuations, as well as net new business.
Trading services revenue for the quarter, including foreign exchange trading revenue and brokerage and other fees, were down 35% to $270 million from $418 million a year ago. Brokerage and other fees surged 47% due primarily to increases in electronic trading, while foreign exchange revenue dropped 57% due to lower volatility and lower volumes.
Securities finance revenue plunged 75% to $83 million from $329 million in the prior-year quarter, due primarily to compressed spreads as well as lower volumes. Processing fees and other were $60 million, down 28% from $83 million in the year-ago quarter.
Total expenses for the fourth quarter were $1.57 billion, down 32% from $2.31 billion in the year-ago quarter. Operating-basis expenses increased 1.8% to $1.56 billion from $1.53 billion in the same quarter a year ago.
Total assets under management during the quarter grew 32% to $1.91 billion from $1.44 billion in the prior-year quarter.
Return on common shareholders' equity for the quarter was 14.0%, up from 8.4% in the year-ago quarter, while on an operating-basis, return on common shareholders' equity dropped to 13.8% from 24.3% last year.
At the end of the fourth quarter, total assets under custody rose 18% to $18.795 trillion from $15.907 trillion at December 31, 2008. Total assets under management at December 31, 2009 increased 32% to $1.911 trillion from $1.444 trillion a year earlier.
For fiscal 2009, the company reported a net loss of $2.04 billion or $4.31 per share, compared to net income of $1.79 billion or $4.30 per share posted in the full-year 2008. Excluding an after-tax extraordinary loss of $3.68 billion or $7.77 per share, the company reported a net income of $1.64 billion or $3.46 per share for fiscal 2009.
On an operating-basis, net income for the full year dropped to $1.95 billion or $4.11 per share from last year's $2.34 billion or $5.61 per share. Analysts expected the company to report earnings of $4.10 per share for fiscal 2009.
Total revenues for the full-year declined 19% to $8.64 billion from $10.69 billion reported last year. Operating-basis revenue decreased 16.4% to $8.76 billion from $10.48 billion in the previous year. The Street was looking for full-year 2009 revenues of $8.65 billion.
Looking ahead, president and chief operating officer, Joseph Hooley said "We begin 2010 from a position of strength. We believe we are well positioned globally and that, over economic and market cycles, we will maintain our long-term financial goals of operating-basis revenue growth of 8 percent to 12 percent, growth in operating-basis earnings per share of 10 percent to 15 percent, and operating-basis return on equity of between 14 percent and 17 percent."
However, given the past year's quarterly momentum in servicing fee and management fee revenue, the company is increasingly confident in its ability to grow revenue during 2010. It also expects operating-basis earnings per share in fiscal 2010 to be modestly below the lower end of the 10% to 15% long term growth range.
The company also expects full-year 2010 operating-basis earnings per share, excluding merger and integration costs and conduit discount accretion, to be only slightly above the level of fiscal 2009, reflecting in part increased outstanding average shares.
Among others in the industry, Bank of New York Mellon Corp. (BK), the world's biggest custodial bank, reported that profit for the fourth quarter climbed from last year to $593 million or $0.49 per share from $28 million or $0.02 per share, helped by higher revenues and the absence of last year's hefty net securities losses. Total quarterly revenues increased to $3.32 billion from $2.86 billion in the same period last year.
In Wednesday's regular trading session, STT is currently trading at $45.67, up $2.47 or 5.72% on a volume of 3.71 million shares. In the past 52-week period, the stock has been trading in a broad range of $14.43 to $55.87.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.