Reuters: Global Markets: State Street shares fall 5 percent after earnings drop

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State Street shares fall 5 percent after earnings drop Jul 17th 2012, 13:33 Tue Jul 17, 2012 10:30am EDT (Reuters) - Shares of State Street Corp (STT.N) said on Tuesday that second-quarter net income declined 4 percent on sharply lower foreign exchange revenue and weakness in international stock markets, sending shares down more than 5 percent. Separately, State Street said it will buy Goldman Sachs Group Inc's (GS.N) hedge fund administration business for $550 million in cash. Boston-based State Street's net income declined to $480 million, or 98 cents a share, from $502 million, or $1.00 a share, a year earlier. The results include a $46 million loss from the sale of Greek investment securities. Excluding items, per-share profit was $1.01, beating the analysts' average estimate of 97 cents, according to Thomson Reuters I/B/E/S. State Street Chief Executive Jay Hooley told investors and analysts on a conference call he expects capital markets to remain subdued around the globe. "We expect global GDP (gross domestic product) to rise a somewhat anemic 3.2 percent in 2012, reflecting slow growth in the advanced economies and more marked slowing in the developed ones," Hooley said. "We expect the U.S. recovery to remain lackluster." Company revenue declined to $2.42 billion from $2.49 billion. But at the same time, State Street trimmed year-over-year employee compensation and benefit costs by nearly 7 percent. The costs had worried investors and analysts when the company reported first-quarter results in April. "Their ability to control expenses was a huge positive," Edward Jones analyst James Shanahan said. Services fees generated from $22.4 trillion in assets under custody and administration dropped 3 percent to $1.09 billion from a year earlier. Trading services revenue, which mostly includes foreign exchange activity, fell 18 percent to $255 million. Investment management fees from State Street Global Advisors was off 2 percent at $246 million. SSgA's assets under management came to $1.9 trillion, down 9 percent from a year earlier. Shares of State Street were down 5.1 percent at $41.89. (Reporting by Tim McLaughlin in Boston; editing by Jeffrey Benkoe and Lisa Von Ahn) Link this Share this Digg this Email Reprints

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