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State Street Beats as Most Revenue Items Increase (Update 1)

  • First-quarter net income to common shareholders of $443 million, or 96 cents a share
  • Earnings beat the consensus EPS estimate of 93 cents
  • Total revenue of $2.470 billion slightly below consensus estimate of $2.479 billion
  • Assets under custody, administration and management grow 3% sequentially and 10% year-over-year

Updated from 9:04 a.m. ET with late morning market action and comment from Jefferies analyst Ken Usdin.

NEW YORK ( TheStreet) -- State Street (STT - Get Report) of Boston on Friday reported a continued decline in net interest revenue -- more than offset by increases in servicing and management fees -- and trading revenue.

The institutional asset manager and investment services provider reported first-quarter net income available to common shareholders of $443 million, or 96 cents a share, declining from $521 million, or $1.11 a share, in the fourth quarter, but increasing from $410 million, or 84 cents a share, in the first quarter of 2012.

First-quarter revenue totaled $2.470 billion, increasing from $2.463 billion the previous quarter, and $2.421 billion a year earlier.

The first-quarter results came in ahead of the consensus estimates among analysts polled by Thomson Reuters, of a profit of 93 cents a share, on revenue of $2.479 billion.

The main factor in the sequential earnings decline was an increase in compensation expenses, which the company said was "due to the effect of the $118 million of equity incentive compensation for retirement-eligible employees and payroll taxes." Compensation expenses totaled $1.035 billion in the first quarter, compared to $915 million in the fourth quarter and $1.064 billion in the first quarter of 2012.

Most revenue trends were positive. Servicing fees were up 2% sequentially and 9% year-over-year, to $1.175 billion in the first quarter. Management fees totaled $263 million in the first quarter, rising 1% from the previous quarter, and 11% from a year earlier. First-quarter trading services revenue was up 16% sequentially and up slightly from a year earlier, to $281 million.

State Street's net interest revenue declined to $577 million in the first quarter from $600 million in the fourth quarter and $607 million in the first quarter of 2012. The sequential decline reflected the lower number of days in the first quarter. The year-over-year decline resulted from a narrowing of the net interest margin to 1.31% in the first quarter from 1.36% the previous quarter and 1.52% a year earlier.

State Street CEO Joseph L. Hooley said "the strength in the equity markets, combined with higher volumes and increased volatility in foreign-exchange trading, supported our fee revenue. We continue to control expenses across the organization and generate benefits from our transformation program."

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