State Street reported securities finance revenue of $91 million for the third quarter of 2012, a decline of 36.4% from the second quarter of 2012. The custodian said the fall was due primarily to second-quarter seasonality. Compared to the third quarter of 2011, securities finance revenue increased 7.1% due to higher spreads, offset partially by lower volumes.
State Street reported revenues of $2.36 billion for the third quarter, a 3% fall from $2.42 billion and $2.43 billion in the second quarter of 2012 and third quarter of 2011, respectively.
Net income was $654 million, an increase from $480 million in the second quarter of 2012 and from $543 million in the third quarter of 2011.
Earnings per share (EPS) of $1.36, increased from $0.98 in the second quarter of 2012 and from $1.10 in the third quarter of 2011. The third quarter of 2012 includes a net after-tax benefit of $0.35 per share, mostly associated with claims associated with the 2008 Lehman Brothers bankruptcy. Return on average common shareholders’ equity (ROE) of 13.3% increased from 10.0% in the second quarter of 2012 and 11.2% in the third quarter of 2011.
The GAAP-reported result include a net pre-tax benefit of $277 million, which includes a $362 million benefit related to claims associated with the 2008 Lehman Brothers bankruptcy; partially offset by a $60 million provision for previously disclosed litigation arising out of the custodians asset management and securities lending businesses.
On a non-GAAP, or operating basis, the custodian was awarded new business of $211 billion in asset servicing mandates. To this end, it reported assets under custody and administration of $23,4 billion in the third quarter of 2012 an increase of 4.5% from the second quarter of 2012 and a 9% increase year on year, from $21,5 billion in the third quarter of 2011.
Servicing fees increased 1.3% to $1.1 billion in the third quarter of 2012 from the second quarter of 2012, reflecting strength in global equity markets and net new business. Compared to the third quarter of 2011, servicing fees decreased 0.5%, primarily due to the impact of a weaker Euro and business mix partially offset by market impact.
State Street highlighted the completion of its acquisition of Goldman Sachs Administration Services (GSAS) yesterday.
Jay Hooley, State Street’s chairman, president and chief executive officer, said, Our third-quarter results reflect continued resilience across both asset servicing and asset management, partially offset by weakness in trading services. In a difficult environment, we were able to achieve positive operating leverage by controlling expenses and by continuing to implement our Business Operations and Information Technology Transformation program.
While acquisitions are consistent with our long-term growth strategy, one of our highest priorities in the current environment is returning capital to our shareholders. During the third quarter, we purchased $480 million of common stock, leaving $840 million remaining under our $1.8 billion common stock authorization, which we plan to complete in March of 2013.”
(JDC)