State Street issues Q2 results

State Street has just issued its second quarter results. Servicing fees of $1,325m in the second quarter of 2015 were up 4.1% from the first quarter of 2015, primarily due to net new business and stronger global equity markets, it says.

Compared to the second quarter of 2014, servicing fees increased 2.9%, primarily due to net new business and stronger US equity markets, partially offset by the impact of the stronger US dollar.

Management fees of $304m in the second quarter of 2015 rose 1.0% from the first quarter of 2015. Compared to the second quarter of 2014, management fees increased 1.3%, primarily due to stronger US equity markets and net new business, partially offset by the impact of the stronger US dollar.

By contrast, foreign exchange trading revenue of $167m in the second quarter of 2015 fell 17.7% from the first quarter of 2015, primarily due to lower currency volatility. Compared to the second quarter of 2014, foreign exchange trading revenue rose by 16.0%, due to higher currency volatility and client-related volumes.

Brokerage and other fees of $114m in the second quarter of 2015 decreased 5.8% from the first quarter of 2015, primarily due to lower electronic foreign exchange trading. Compared to the second quarter of 2014, brokerage and other fees decreased 1.7%.

Securities finance revenue of $155m in the second quarter of 2015 increased $54m, or 53.5% from the first quarter of 2015, primarily due to seasonality. Compared to the second quarter of 2014, securities finance revenue increased 5.4%, due to new business from enhanced custody, its principal securities lending service for custody clients, partially offset by lower spreads.

Processing fees and other revenue of $115m in the second quarter of 2015 increased 0.9% from the first quarter of 2015. Compared to the second quarter of 2014, processing fees and other revenue increased 6.5%, due to higher revenue associated with tax advantaged investments.

Net interest revenue of $556m in the second quarter of 2015 decreased 1.6% from the first quarter of 2015. Compared to the second quarter of 2014, net interest revenue decreased 3.3%, primarily due to lower yields from interest earning assets and the impact of the stronger US dollar, partially offset by higher client deposits.

Operating-basis net interest revenue excludes discount accretion on former conduit securities and is presented on a fully taxable-equivalent basis. State Street says it expects to record aggregate pre-tax conduit-related accretion of approximately $276m in interest revenue from July 1, 2015 through the remaining lives of the former conduit securities. This expectation is based on numerous assumptions, including holding the securities to maturity, anticipated prepayment speeds and credit quality.

Net interest margin, including balances held at the Federal Reserve and other central banks, decreased to 96 basis points in the second quarter of 2015 from 101 basis points in the first quarter of 2015 and from 112 basis points in the second quarter of 2014. This reflects higher interest-earning assets and lower yields, it concludes.