State Street Q1 profits impacted by provisions, lower revenues

State Street posted lower than expected first quarter profits due in part to its provisions for credit losses.

"Our first-quarter results reflect the resiliency of our business model, notwithstanding continued interest rate increases and subsequent significant market movements, volatility and disruption within other parts of the banking industry," said State Street boss, Ron O'Hanley.

"Through this, our total revenue was durable and grew as we delivered strong year-over-year net interest income growth, which enabled us to offset fee revenue headwinds from significantly lower average market levels."

The lender posted a 9% decline in net income for the three months ending on 31 March to reach $549m, for diluted earnings per share of $1.52.

That was less than the $1.64 consensus EPS estimate according to a poll of analysts conducted by Dow Jones Newswires.

State Street recorded $44m in provisions linked to credit losses, of which $29m was tied to a lifeline for First Republic.

Total revenues meanwhile edged up by 1% versus the year earlier period to reach $3.1bn.

Within that, total fee revenues were down by 9% to $2.34bn, but net interest income jumped by half to $766m.

In parallel, assets under management fell by 10% from a year ago to approximately $3.62bn.

On the outlook, O'Hanley said: "We are optimistic about client onboardings and we expect revenue growth in the coming quarter.

"These factors, along with our commitment to maintaining our strong balance sheet position, will enable us to continue to generate and return capital to our shareholders."

Ahead of State Street's results, TickMill Group analyst, James Harte, wrote: "On the back of the USD reaction we saw to last week’s US banking sector results, traders are keen to receive further performance updates from the financial sector.

Ahead of big dogs Morgan Stanley and Goldman Sachs tomorrow, traders will today be focusing on State Street which is due to report its Q1 performance today. On the numbers front, the market is looking for EPS of $1.64 on revenues of $3.126 billion. This will mark a slight softening in both EPS and revenues though, so long as expectations are satisfied, should see the company’s stock rally."