State Street Global Advisors, the money manager behind the largest ETF in the world, “SPY,” reported a first-quarter net income increase of 8 percent, thanks to stronger-than-expected equity market performance and a focus on expense controls.
The asset management firm said net income in the first quarter totaled $443 million, or $0.96 a diluted share, from $410 million, or $0.84 a share, in the same year-earlier period. State Street’s first-quarter revenues rose to $2.47 billion, and total assets under management were up 9.9 percent year-on-year at $2.176 trillion.
ETF assets in the first quarter grew 5 percent from the previous quarter to $354 billion. The growth came despite net outflows of some $6 billion from the firm’s two largest ETFs, the SPDR S'P 500 (SPY)—which historically sees institutional repositioning in first quarters—and the SPDR Gold Trust (GLD). State Street isn’t the investment manager of that ETF, but acts as distribution agent.
“The strength in the equity markets, combined with higher volumes and increased volatility in foreign-exchange trading, supported our fee revenue,” State Street’s CEO Joseph Hooley said in a release about the earnings.
“Overall, the environment continues to show signs of gradual improvement as reflected by investors shifting into equities,” he said. “However, given the ongoing fragile state of the global markets, we continue to remain cautious for 2013.”
As far as ETF clients are concerned, Hooley said the first quarter continued to show investors’ risk-taking behavior run ahead of prior years, even if overall appetite for risk has moderated some in recent weeks.
State Street continued to focus on controlling costs—it reduced its workforce by 630 people in January—and compensation and employee benefits expenses in the first quarter dropped 2.7 percent year-on-year, partly due to savings stemming from the company’s so-called business operations and information technology transformation program.
This program is expected to bring total incremental pretax expense savings of $220 million in 2013, the report said. The entire program should generate savings exceeding $500 million by 2015, Hooley said in a conference call about the earnings.
State Street is also upping its share repurchase program to $2.1 billion in the March 2013 to March 2014 period, an increase of 16.6 percent from the previous year. Common stock dividends were also increased by 2 cents to $0.26 per share in the first quarter.
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