E Street said yesterday that first-quarter profit fell 11 per cent as compensation and other employee benefits surged at nearly three times the pace of operating revenue.
State Street said compensation and employee benefits in the first quarter rose nine per cent from a year earlier to $1.06bn (£665m). The bank attributed the increase to worker demographics, merit increase awards from last year, and hires from new business and acquisitions.
Total operating revenue rose just 3.1 percent to $2.4bn.
State Street chairman and chief executive Jay Hooley said some compensation expenses were accelerated into the first quarter because the bank had more people who were age 55 with five years of service. As a result, expenses related to stock-based awards to those employees are recognized in one quarter versus being spread out over several quarters, Hooley explained.
The Boston-based custody bank’s net income was $417m, or 85 cents a share, including preferred stock dividends and other adjustments. That compared with $466m, or 93 cents a share, in the year-ago period.
Assets under custody and administration, a key driver of fees, were $23.2 trillion at the end of March, compared with $22.6 trillion a year earlier.
Custody bank activities include managing investments, lending stocks, trading foreign currencies, tracking asset valuations and providing accounting services to mutual funds.