State Street Corp , the No. 2 global custody bank, said Tuesday that third-quarter net income rose 20 percent, but foreign currency trading results fell sharply, pulling down overall revenue.
Third-quarter foreign exchange revenue dropped 44 percent to $115 million from the year-ago level of $204 million. Total operating revenue was $2.35 billion, down 2.7 percent from the year-ago quarter.
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State Street, which is fighting several lawsuits that claim it overcharged on forex trades, blamed lower volatility for the decline in revenue.
Fees from managing investments, meanwhile, were a bright spot, surging 10 percent to $251 million amid a rise on global stock markets. Net interest revenue - largely the difference between what the bank pays on deposits and earns on loans and investments - rose 7 percent to $619 million from a year ago.
Compensation and benefit costs, which have been criticized by large shareholders, declined 5 percent in the quarter to $916 million.
Boston-based State Street's net income rose to $654 million, or $1.36 a share, after a $362 million benefit related to the 2008 bankruptcy filing by Lehman Brothers. In the year-ago period, the bank earned $543 million, or $1.10 a share.
On an operating basis, State Street beat the expectations of analysts, earning 99 cents a share. Analysts, on average, expected 96 cents a share, according to Thomson Reuters I/B/E/S.
Total assets under custody and administration totaled $23.44 trillion at the end of September, up from $22.4 trillion in the second quarter and $21.5 trillion in the year-ago period.
State Street's operations include keeping track of mutual fund prices, lending stocks, trading foreign currencies and gathering deposits from the world's largest institutional investors.
It is the second largest custody bank behind BNY Mellon Corp , which reports results on Wednesday.
(Reporting by Tim McLaughlin; Editing by Jeffrey Benkoe)