State Street profits were up 1.2 per cent in the third quarter this year, on a non-operating basis, rising to $544.3 million from $538 million year on year.
Third quarter 2011 earnings per common share are at $1.10 compared to $1.08 in the same quarter the year previous.
Revenue was at $2.4 billion in the third quarter this year, up five per cent year on year, however, expenses jumped 18 per cent to $2.3 billion.
In terms of revenue, servicing fees were up 10 per cent to $1.1 billion in the third quarter of 2010 attributed to net new business and the improvement in daily average equity valuations. Securities finance revenue plummeted 38 per cent from Q2 this year to $85 million, though it was still up 25 per cent year on year.
On an operating basis, revenues increased from last year’s quarter by some 12 per cent on the back of new business wins as well as stronger foreign exchange revenue, according to State Street’s chairman, president and CEO, Joseph Hooley.
Hooley adds that the custodian ended the third quarter with a tier one common ratio of 16 per cent leaving it well positioned to submit a capital plan to the Federal Reserve next year.
“As we approach the end of 2011 and plan for 2012, we expect to face a prolonged, worldwide low interest-rate environment, constrained economic growth, anticipated higher capital requirements, and increased regulatory and compliance costs. We are addressing these challenges by remaining focused on our clients and growing our business, while controlling expenses with a goal of continuing to generate positive operating leverage,” he says.
Assets under custody and administration in the third quarter fell 5.5 per cent to $21.5 trillion quarter on quarter, but were up 6.3 per cent from $20.2 trillion from the same period last year.
Just before earnings were released, activist investor Nelson Peltz, through Trian Fund Management, criticised State Street for costs outgrowing sales, despite significant asset growth.
Salaries and employee benefits rose almost 11 per cent to $965 million year on year, but were down by 4.4 per cent compared to the second quarter this year. Next on the list were information systems and communications expenses at $191 million, up 5.5 per cent year on year.
