State Street in Boston reported higher fourth-quarter profits as a result of new asset-servicing contracts, although the new tax law elevated expenses.
The $238 billion-asset custody bank’s net income rose 19% to $687 million compared with a year earlier. Earnings per share of $1.83 were 13 cents higher than the mean estimate of analysts compiled by FactSet Research Systems.
State Street recorded several one-time items associated with the Tax Cuts and Jobs Act, with a net total expense of $250 million. That figure included a one-time repatriation tax of $454 million, which was offset by a $197 million reduction in deferred tax liabilities. Additionally, revenue was reduced by $20 million because of changes in the amortization of tax-advantaged investments.
Noninterest expense rose 7% to $2 billion. State Street recorded an additional $133 million in expenses tied to its Beacon restructuring program. It also gave employees annual merit increases and performance-based incentives.
Net interest income increased 20% to $658 million as higher interest rates helped yields on earning assets.
Noninterest income climbed 6% to $2.3 billion thanks to new business in administering clients’ funds. Total assets under custody and administration rose 15% to $33.1 trillion on a surge of money into exchange-traded funds and pension products. Total assets under management climbed 13% to $2.8 trillion.
“We continue to benefit from our strong market position and our ability to deliver servicing solutions evidenced by the approximately $445 billion of new servicing commitments in the fourth quarter,” Chairman and CEO Joseph Hooley said in a news release Tuesday.