State Street operating profit boosted by fee income

BOSTON (Reuters) - State Street Corp (STT.N), the world's third largest institutional investor, reported a 19 percent rise in first quarter operating earnings as improved financial markets and acquisitions boosted revenue.

State Street, which provides services such as record-keeping for mutual and hedge funds, said that excluding special items, earnings rose to $444 million, or 88 cents a share, from $371 million, or 75 cents a share, year earlier.

Analysts had expected 86 cents a share, according to Thomson Reuters I/B/E/S.

Net income was $471 million, or 93 cents a share, compared with $495 million, or 99 cents, a year earlier.

Late last year the company took a charge to reposition its portfolio and cut jobs.

Assets under custody and administration rose 19 percent from a year earlier to $22.6 trillion and climbed 5 percent from the 2010 fourth quarter.

Assets under management rose 7.7 percent from a year ago to $2.1 trillion, as investment management fees earned at the company's State Street Global Advisors unit increased, in part because of improved financial market conditions.

The company bought the securities servicing business from Intesa Sanpaolio and Mourant International Finance Administration to service alternative assets. Both deals boosted earnings in the quarter.

State Street also recently bought the assets management business from Bank of Ireland, which the company said was off to a good start.

In the first quarter operating basis revenue climbed 10.1 percent to $2.3 billion.

After passing a government test, State Street, like its main rival Bank of New York Mellon, raised its dividend to 18 cents per share from 1 cent per share.

(Reporting by Svea Herbst-Bayliss; editing by John Wallace and Derek Caney)