State Street Corp. led custody banks reporting higher fee income in the first quarter as acquisitions and the stock market rally boosted assets.
Fee revenue at State Street rose 16% from a year earlier, to $1.79 billion, the bank said Tuesday.
Meanwhile, Bank of New York Mellon Corp. said fee income increased 12%, to $2.83 billion. But Northern Trust Corp. said noninterest income, a figure consisting mainly of fee revenue, declined 0.6%, to $663.5 million.
"Both State Street and Bank of New York were adversely affected by low interest rates, but State Street seems to have had the better quarter," said Gerard Cassidy, an analyst with RBC Capital Markets in Portland, Maine. State Street benefited from strength in its asset management business, while BNY Mellon was hurt by foreign exchange and securities lending, he said.
BNY Mellon and State Street together spent at least $4.4 billion on acquisitions over the past year to add assets and expand abroad as interest rates near zero eroded income from money funds, securities lending and fixed-income investments.
Joseph Hooley, who took over as State Street's chief executive a year ago, said acquisitions in Italy and the U.K. last year have exceeded targets.
Net income at State Street fell to $466 million, or 93 cents a share, from $492 million, or 99 cents, a year earlier, when earnings were boosted by the sale of securities that the bank had previously written down. On an operating basis, profit rose 19%, to $439 million.
BNY Mellon reported a 12% increase in first-quarter net income to $625 million, or 50 cents a share, from $559 million, or 46 cents, a year earlier.
Northern Trust said profit for the three months through March fell 3.9%, as low interest rates reduced lending and money market revenue.
Custody banks earn fees for keeping records, tracking performance and lending securities to institutional investors such as mutual funds, pensions and hedge funds.
U.S. companies have expanded in Europe, where the market is more fragmented and banks have been selling custody units to strengthen their balance sheets.
