- State Street to purchase Goldman Sachs Administration Services for $550 million.
- The company reports second-quarter earnings of 98 cents a share, beating the consensus estimate by a penny.
- Second-quarter share buybacks totaled $480 million, at an average price of $43.26.
- Second-quarter return on equity declines to 10.0% from 10.6% a year earlier.
Updated with market close information, comments from Jefferies analyst Ken Usdin, and comments from Evercore Partners analyst Andrew Marquardt.
The deal is expected to close during the fourth quarter, subject to regulatory approval, with State Street expecting "the transaction to be accretive in the first full year of operation on a cash basis." GSAS administers roughly $200 billion in hedge fund assets for about 150 clients.State Street CEO Joseph Hooley said that "this acquisition will establish us as the market-leader in servicing hedge funds." Investors didn't take kindly to the announcement sending State Street's shares down over 6% to close at $41.31. The Boston custody bank reported second-quarter net income available to common shareholders of $480 million, or 98 cents a share, bearing the consensus estimate among analysts polled by Thomson Reuters by a penny. In comparison, the company earned $417, or 85 cents a share, in the first quarter, and $502 million, or a dollar a share, in the second quarter of 2011. Total operating revenue during the second quarter was $2.4 billion, matching the previous quarter's results, but declining from $2.5 billion a year earlier, as State Street saw declines in trading services revenue to $255 million from $280 million in the first quarter and $311 million the second quarter of 2011. Meanwhile, processing fees and other revenue slipped to $48 million in the second quarter, from $94 million the previous quarter, and $70 million a year earlier.
Net interest revenue grew to $629 million during the second quarter, from $607 million in the first quarter, and $554 million in the second quarter of 2011. Total expenses declined to $1.73 billion in the second quarter, from $1.80 billion the previous quarter, and $1.76 billion a year earlier. The sequential decline reflected the usual first-quarter spike in compensation expenses. State Street said that its "business operations and information technology transformation program is on track to achieve an expected $94 million of annual pre-tax, run-rate operating-basis expense savings in 2012 compared to the Company's 2010 run rate." State Street's total assets under custody and administration declined to $22.4 trillion as of June 30, from $23.2 trillion the previous quarter, and $22.7 trillion a year earlier. Assets under management declined to $1.9 trillion from $2.0 million in March, and $2.1 trillion in June 2011.
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