NEW YORK — Bank of New York Mellon Corp. and State Street Corp., two trust banks reporting fourth-quarter periods Wednesday, showcased that their services remained in high demand, while third competitor Northern Trust Corp. failed to keep up with falling interest income.

At the trust banks, which act as the banks and servicers for corporations and Wall Street, higher stock-market values and increased volatility help boost their fee collections. Clients increased action in areas like foreign exchange trading.

But with interest rates at depressed levels, the banks' margins remained pressured; moreover, they earned less on their interest-paying operations.

Both BNY Mellon and State Street said assets under management and revenues increased enough to offset the interest income declines.

Northern Trust, however, blamed the low rate environment for missing Wall Street's expectations.

Shares were weak for the group in early trading, with BNY Mellon down 0.7% to $31.80, State Street down 2.1% to $49.02 and Northern Trust off a sharper 4.7% to $53.

BNY Mellon's fourth-quarter profit climbed 15% to $679 million, or 54 cents a share, from $593 million, or 49 cents a share a year earlier. Excluding items such as amortization of intangible assets and restructuring charges, earnings rose to 65 cents from 60 cents, beating the 57-cent average estimate of analysts polled by Thomson Reuters.

The bank reported assets under management rose 5% to $1.17 trillion, a record level for BNY Mellon.

Revenue from fees climbed to $2.97 billion, up 16%. But its net interest margin, which measures how much a bank makes on its investments and loans compared to its deposits and debts, still slumped to 1.54% from 1.77%.

BNY Chairman and Chief Executive Robert P. Kelly said interest income will probably continue to be muted, but that BNY Mellon concentrates more on its fee revenues which continued to show "good performance."

Kelly also said BNY Mellon is waiting for regulators' permission to return more capital to shareholders but doesn't yet know when that will happen. BNY Mellon, and the other trusts, have higher capital cushions than most financials. BNY Mellon has a Tier 1 common ratio of 11.8%.

At State Street, based in Boston, fourth-quarter net profits were whacked by restructuring moves and real-estate changes, part of a longer-term plan to transform how the bank operates. The trust bank sold mortgage- and asset-backed securities and plans to cut 1,400 employees, among other moves, which in total cost the bank 67 cents per share in profit.

Excluding those items, State Street would have reported operating earnings per share of 87 cents, compared with 71 cents a year earlier and the 86 cents analysts expected.

Operating revenue rose 9.6% to $2.28 billion, also more than the $2.14 billion Wall Street had forecast.

State Street's assets under management were up 3% from the prior year and servicing fees were up 19%. But its net interest margin fell to 2.07% from 2.35%.

At Northern Trust, profit fell 22% to $157.1 million, or 64 cents a share, compared with $200.3 million, or 82 cents a share, a year earlier. Absent additional income from a settlement with Visa Inc., earnings would have fallen to 59 cents a share, missing the 71 cents analysts had expected.

Revenue slid 5% to $906.4 million, also short of the $941 million expected.

Northern Trust did report higher assets under management, of $643.6 billion, but the figure was down over the last three months.

Its net interest margin fell to 1.3% from 1.43% as the bank said the "prolonged low interest rate environment" meant the amounts it was making on its securities were down, and older securities that were maturing were having to be replaced by new, lower rate paying investments.

All three banks said foreign exchange trading was a positive area for revenue growth, as market volatility and volume picked up in the past three months. Kelly said higher customer activity drove those gains as financial markets improve.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.