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BL: State Street Earnings Increase 69% on New Business (Update1)

By Christopher Condon

April 15 (Bloomberg) -- State Street Corp., the world's largest money manager for institutions, said first-quarter earnings rose 69 percent as it added new custody clients and rate cuts by the U.S. Federal Reserve increased lending fees.

Net income climbed to $530 million, or $1.35 a share, from $314 million, or 93 cents, a year earlier, the Boston-based company said today in a statement. Earnings included costs of 4 cents a share from its acquisition of Investors Financial Services Corp. Revenue increased 52 percent to $2.58 billion.

The bank raised its 2008 profit forecast in February, with Chief Executive Officer Ronald Logue saying growth would fall in the mid-range between 10 percent and 15 percent. He cited interest-rate cuts by the U.S. Federal Reserve that increased net interest margins for the company.

``The Fed easing rates in the short run is greater than the impact of equities being down,'' Rob Lee, an analyst with Keefe, Bruyette & Woods Inc. in New York, said in an interview before the results were released.

Lee had estimated earnings of $1.25 a share, compared with the $1.30 average of 17 analysts surveyed by Bloomberg.

State Street makes more money when the difference between the short-term rates it pays on deposits and long-term rates it charges on loans widen. Margins grew as the Fed cut its overnight inter-bank rate three times this year to 2.25 percent.

Net interest revenue jumped 92 percent to $625 million. Revenue from securities lending more than tripled to $303 million. Trading services grew 66 percent to $366 million.

Asset-management fees rose 7 percent to $278 million.

Operating expenses climbed 46 percent to $1.77 billion. Compensation-related costs rose 44 percent to $1.06 billion.

Assets under custody rose 21 percent to $14.9 trillion. Assets under management increased 5.9 percent to $1.96 trillion.

State Street released results before the start of regular New York Stock Exchange composite trading. The stock has fallen 5.3 percent this year, compared with the 14 percent drop by the Standard & Poor's Supercomposite Asset Management and Custody Banks Index.

To contact the report on this story: Christopher Condon in Boston at [e-mail]
Last Updated: April 15, 2008 07:49 EDT