BOSTON (AP) -- State Street Corp's stock plunged Tuesday after the company said its net income fell 4 percent in the second quarter as international markets slowed down.
The bank, which provides money-handling services to pension funds and other big investors, said that it's expanding its regulatory compliance and risk management services for hedge funds by buying Goldman Sachs' hedge fund administrative services business for $550 million.
For the April-June quarter, State Street earned $480 million, or 98 cents per share, compared with $502 million, or $1 per share, a year ago.
Excluding acquisition and litigation costs, a loss on Greek investments and other items, earnings were $1.01 per share. Analysts predicted earnings of 98 cents per share, according to a FactSet survey.
Revenue fell 3 percent to $2.42 billion from $2.49 billion as trading revenue and fees for services slumped. Revenue met Wall Street's expectations.
State Street CEO Joseph Hooley said the economic environment was "challenging," with "increasing weakness in international markets." The bank compensated by cutting employee compensation and controlling costs.
The long-running debt crisis in Europe and fears of economic growth slowing in Asia weighed on markets in the second quarter.
Trading services revenue dropped 18 percent to $255 million because of a decline in the currency trading unit and lower brokerage fees. Servicing fees fell 3 percent to $1.09 billion, due in part to the weaker euro.
State Street expects the Goldman acquisition to add to its earnings after the first full year of operation. The deal, which does not include the Goldman's prime brokerage business, will add a business that serves about 150 investment manager clients and administers about $200 billion. The unit's employees will join State Street when the deal closes, which the Boston company expects to happen early in the fourth quarter.
However, equity analysts with Jefferies called the acquisition "disappointing" because it will not add to the company's earnings in the first year.
The analysts noted that a key measure State Street's financial stability, its Basel 3 adjusted Tier 1 common equity ratio, fell to 9.8 percent from 12.7 percent. The lower ratio indicates that State Street has less free cash to invest or lend out. That could limit its long-term profit.
Banks like State Street are in the process of complying with Basel III, a global set of capital standards that were crafted in 2010 and 2011. State Street's capital appears to be weaker under the new, more stringent standards.
State Street fell $2.46, or 6 percent, to $41.68 in afternoon trading Tuesday.
