State Street Global Advisors, the money manager behind the largest ETF in the world, "SPY," posted a 15.6 percent increase in second-quarter net income thanks mostly to strong equity market action and a continued control of costs.
The asset management firm said net income in the second quarter totaled $571 million, or $1.24 a diluted share, compared with $494 million, or $1.01 a share, in the same year-earlier period. Revenues rose to $2.58 billion, and total assets under management were up 12.5 percent year-on-year at $2.146 trillion, although they came in 1.4 percent lower when compared with this year's first quarter.
The firm also reported a 12.6 percent year-on-year increase in management fees, totaling $277 million in second quarter thanks to strong markets and to net new business, which in the quarter amounted to $201 billion in asset servicing mandates and $11 billion in net new assets, excluding the SPDR Gold Shares (NYSEArca:GLD), to be managed at State Street, according to the earnings statement.
State Street's ETF assets ended the quarter at $328.8 billion, down slightly from $354 billion at the end of the first quarter, according to data compiled by IndexUniverse. Outflows of some $11.5 billion from the SPDR Gold Shares (NYSEArca:GLD) in the three-month period ended June 28 were mostly to blame. GLD has now bled more than $19.5 billion year-to-date. State Street isn't the investment manager of that ETF, but acts as distribution agent.
"We reported a strong second quarter with revenue growth driven by new business and improved equity markets," Joseph Hooley, State Street's chairman and CEO, said in a prepared statement. "Seasonal factors and increased market volatility benefited our securities finance and foreign exchange businesses."
State Street continued to focus on controlling costs, and that focus is helping the firm's bottom line. The second-largest U.S. ETF provider cut its work force by 630 people in January. That resulted in a drop in expenses related to compensation and employee benefits expenses, which were partly linked to savings stemming from its business operations and information-technology transformation program.
This program is expected to bring total incremental pretax expense savings of $220 million in 2013, and in its entirety, should generate savings exceeding $500 million by 2015, according to information the company provided earlier this year.
"We achieved positive operating leverage compared to both the first quarter of 2013 and the second quarter of 2012," Hooley said in today's earnings statement.
State Street bought back $560 million of its common stock in the second quarter-part of the firm's efforts to increase its share repurchase program to $2.1 billion in the March 2013 to March 2014 period. That goal represents an increase of 16.6 percent from the previous year.
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