State Street Corp. reported a second-quarter profit after a loss a year earlier and said it removed redemption restrictions on clients at its securities lending business.
Earnings per share rose to 87 cents from a loss of $7.12 a year earlier, when State Street consolidated off-balance-sheet commercial paper programs and wrote down holdings, the Boston-based company said in a statement Wednesday.
State Street booked a $251 million after-tax charge to replenish funds that managed money on behalf of securities lenders, reducing earnings by 50 cents a share. Led by CEO Joseph L. Hooley, the company has cleaned up the fallout from the credit crisis of 2008 by settling lawsuits with regulators, making investors whole who suffered losses in fixed-income funds, and repaying bailout funds.
State Street said in October 2008 that the share value of some of the funds had fallen below $1. While the losses weren't passed on to clients, their ability to withdraw funds was restricted.
Wednesday's move “demonstrates our commitment to resolving the challenges resulting from the market turmoil over the past several years,” Mr. Hooley said in the statement.
On an operating basis, which excludes the charge and other items, State Street reported profit of 93 cents, beating the 72-cent estimate of 15 analysts surveyed by Bloomberg. Second-quarter revenue increased to $2.3 billion from $2.12 billion reported a year earlier.
“On an operating basis, they did substantially better than people expected,” Richard Bove, an analyst based in Lutz, Fla., for Rochdale Securities, said in a telephone interview. “But it's a little more than annoying that these charges keep happening, which obscures what they're doing on an operating basis.”
State Street oversaw $14.1 trillion in custody assets as of March 31, behind Bank of New York Mellon and J.P. Morgan Chase & Co.
