State Street Corp. (NYSE:STT) reported stronger-than-expected earnings for the second quarter, with earnings per share at $3.65, surpassing analysts' estimates of $3.29. Revenue rose 17% year-over-year to $4.05 billion, exceeding expectations of $3.88 billion, the company announced on Thursday.
Revenue Breakdown
The increase in revenue was driven by a 17% rise in fee revenue, attributed to higher servicing and management fees, along with a 26% increase in foreign exchange trading services revenue. Servicing fees grew 13% year-over-year, while management fees surged 29%. However, software services revenue declined by 2%, and securities finance revenue increased by 19% during the quarter.
Assets Under Management
State Street's assets under management (AUM) reached $6.3 trillion, a 23% increase from the previous year. The company also reported a record $57.9 trillion in assets under custody and/or administration (AUC/A), reflecting an 18% year-over-year growth. CEO Ron O’Hanley highlighted that this performance marked the 10th consecutive quarter of positive operating leverage, excluding notable items. Net interest income rose 18% year-over-year to $860 million, aided by a 17-basis-point expansion in net interest margin.
State Street returned $631 million to shareholders in the quarter, which included $400 million in share repurchases and $231 million in dividends, equating to 84 cents per share. The bank's standardized Common Equity Tier 1 (CET1) ratio was reported at 10.8%, a 10 basis point increase from the previous year.
The strong earnings report is likely to influence investor sentiment toward State Street shares, potentially boosting its stock price. The increase in AUM and revenue may also have positive implications for the broader asset management sector.
Investors will watch for further developments in State Street's financial performance as the company prepares for its next earnings release in the upcoming quarter.