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10:01 AM
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State Street Shares Sink After Earnings Drop

Shares of State Street Corp fell nearly 5 percent on Tuesday after the company said second-quarter net income had declined 4 percent on lower foreign exchange volume and weakness in international stock markets.

Separately, State Street said it would buy Goldman Sachs Group Inc's hedge fund administration business for $550 million in cash.

Boston-based State Street's net income declined to $480 million, or 98 cents a share, from $502 million, or $1.00 a share, a year earlier.

The results include a $46 million loss the company took on the sale of Greek investment securities.

Excluding items, State Street's per-share profit was $1.01, beating the analysts' average estimate of 97 cents, according to Thomson Reuters I/B/E/S.

Revenue slipped to $2.42 billion from $2.49 billion. But at the same time, State Street trimmed year-over-year employee compensation and benefit costs by nearly 7 percent. Those costs had worried investors and analysts when the company reported first-quarter results in April.

Services fees generated from $22.4 trillion in assets under custody and administration dropped 3 percent to $1.09 billion from a year earlier.

Trading services revenue, which mostly includes foreign exchange activity, fell 18 percent to $255 million.

Investment management fees from State Street Global Advisors was off 2 percent at $246 million. SSgA's assets under management came to $1.9 trillion, down 9 percent from a year earlier.

Shares of State Street were down 4.8 percent at $42.00 before regular trading began.

(Reporting by Tim McLaughlin in Boston; Editing by Jeffrey Benkoe and Lisa Von Ahn)

Copyright 2010 by Reuters. All rights reserved.

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