Higher Costs from GE Deal, Legal Reserves Lower State Street Profit

Higher costs associated with its GE Asset Management acquisition, legal reserves and job cuts combined to reduce State Street's third-quarter profit.

The $256 billion-asset Boston company's net income fell 6% to $507 million from a year ago. Earnings per share fell 1.5% to $1.29. Total revenue rose 0.2% to $2.6 billion.

The third-quarter results included several one-time items: a $5 million charge to cover the costs of job cuts and other expense savings, which reduced earnings per share by a penny; the July acquisition of GE Asset Management, which generated an additional $65 million of revenue and $86 million of expenses; and a $42 million pre-tax charge to establish a legal reserve related to a U.S. investigation of State Street's transition management business in the United Kingdom.

Assets under custody and administration rose 7% to $29.2 trillion. Assets under management rose 11% to $2.4 trillion. State Street won new asset-servicing business in the quarter totaling $212 billion.

Noninterest revenue fell 1.1% to $2.08 billion. Servicing fees rose 1.1% to $1.3 billion. Foreign exchange revenue fell 10% to $159 million on lower volatility and client-related volumes.

Net interest revenue rose 5% to $537 million on higher discount accretion related to State Street's former conduit securities.

Noninterest expense rose 1.1% to $1.98 billion from costs tied to the GE Asset Management acquisition and higher technology costs.

State Street increased the estimate of yearly cost savings from its State Street Beacon program to $165 million from its previous estimate of $140 million.

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