State Street is bullish on profit target
ASSET management and custody firm State Street said yesterday that quarterly operating earnings would easily top Wall Street forecasts, sending its shares up nearly 10 per cent and boosting the broader market.
State Street, the third-largest US custody bank, said second-quarter operating earnings would be 93 cents a share, handily beating analysts’ average forecast of 72 cents.
The company offered only a preview of its earnings, leaving analysts to wait for its full report, due 20 July, to learn exactly why results were so strong.
But it did hint at the reasons, saying momentum in revenue from servicing fees and improved revenue from trading-services fees powered operating earnings.
“These expected results are consistent with the full-year operating-basis outlook we provided in the second quarter,” the company said in a statement.
State Street, which earns fees for offering services like record-keeping to mutual and hedge funds, also said it would take a one-time charge of $251m (£209m), or 50 cents per share, in the quarter for an injection of money to support trust funds that its money management arm offers.
State Street injected $330m into the collateral pools held by its State Street Global Advisors securities lending funds. The move will allow it to lift redemption restrictions, in place since October 2008, starting next month.
This is expected to reduce “potential liability concerns,” the company said.
Analysts welcomed the move, saying State Street had tackled a long-time problem quickly after a new chief executive took over in March.