State Street's cost-cutting plan began to pay dividends, as the Boston company's second-quarter profit rose sharply on lower expenses.
The $255 billion-asset company's net income rose 50% to $585 million from a year earlier, it said Wednesday. Earnings per share rose 58% to $1.47. Revenue fell 1.3% to $2.6 billion.
The quarter's results included a $53 million gain from the sale of the WM/Reuters foreign exchange benchmark business to Thomson Reuters and a $58 million charge for an increase in reserves for amounts invoiced to clients for certain expenses.
Total expenses fell 13% to $1.86 billion, benefiting from a favorable comparison with last year when State Street recorded a legal provision. State Street also had lower costs for professional services, securities processing and travel.
State Street's cost-cutting plan is now projected to generate at least $140 million in yearly cost savings, starting this year. Previously it was projected to save $100 million a year.
Fee revenue fell 1.1% to $2.1 billion on lower trading services and brokerage and other trading services. Revenue from foreign exchange trading fell 6% to $157 million. On a quarterly basis, FX trading revenue rose 0.6%, as the surprise Brexit vote in June caused increased trading volatility late in the quarter.
Net interest revenue fell 2.6% to $521 million on lower discount accretion associated with former conduit securities.
Assets under custody and administration fell 3% to $27.8 trillion, and assets under management fell 3% to $2.3 trillion.
State Street disclosed on Tuesday that it had agreed to pay $382.4 million to settle allegations that it applied hidden markups to clients' currency trades, according to Bloomberg. Previously established reserves will be sufficient to cover all costs associated with the agreement, the company said during a Wednesday conference call.