WRAPUP 2-BNY, State Street shares fall on rate worries

* BNY Q3 oper EPS $0.55 vs Street view $0.54

* State Street oper EPS $0.86 vs Street view $0.83

* BNY shares down 1.1 pct, State Street down 0.5 pct
(Changes headline, adds comments from call, interview, updates
share prices)

By Elinor Comlay and Svea Herbst-Bayliss

NEW YORK/BOSTON, Oct 19 (BestGrowthStock) – Bank of New York Mellon
(BK.N: ) and State Street Corp (STT.N: ) posted
higher-than-expected earnings, but shares of the large U.S.
custody banks fell as investors worried they may struggle to
repeat a performance fueled by major acquisitions.

The banks, while increasing their assets under custody and
administration in the quarter, are facing a prolonged low
interest-rate environment that depresses the fees they can
charge.

Like the large U.S. consumer and investment banks, BNY
Mellon and State Street are also struggling with new
regulations and lower trading activity from investors who are
still nervous about the state of the economy.

“The environment is one of tremendous uncertainty for the
consumer as well as for the business community in the United
States, driven by tax uncertainties, regulatory uncertainties
and economic uncertainties,” BNY Mellon Chief Executive Officer
Bob Kelly told Reuters.

Rather than making new acquisitions, BNY Mellon is focusing
on integrating the servicing companies it bought this year and
on trimming costs broadly, Kelly told analysts.

The company is preparing for an extended period of low
interest rates, he added.

BNY Mellon shares were down 1.1 percent, while State Street
fell 0.5 percent.

Bank of America Corp (BAC.N: ), the largest U.S. bank by
assets, reported a higher-than-expected third-quarter operating
profit on Tuesday but its shares fell about 0.4 percent.
[ID:nN19106691]

Goldman Sachs Group (GS.N: ) shares were up 2.7 percent after
that bank reported a lower profit that still beat analysts’
expectations. [ID:nN19113434]

ACQUISITIONS

Both BNY Mellon and State Street said they had benefited
from acquisitions that increased the customer assets they
service.

During the quarter, BNY Mellon bought two companies that
provide back-office servicing for customers’ money, helping
increase the bank’s assets under custody and administration 10
percent from a year earlier to $24.4 trillion.

State Street’s acquisitions were Intesa Sanpaolo’s
securities servicing business and Mourant International Finance
Administration. It said assets under custody and administration
rose 13 percent from a year earlier to $20.23 trillion.

The company’s pickup in earnings prompted CEO Joseph Hooley
to sound a cautiously optimistic note for the full year.

“With the support of the two acquisitions, as well as
strong year-to-date wins in servicing and growth in passive
strategies and ETFs in asset management, we continue to expect
that our operating-basis earnings per share, which exclude
discount accretion, will be slightly above the adjusted
operating-basis $3.32 per share recorded last year,” he said in
a statement.

State Street’s operating profit increased to 86 cents a
share from 71 cents a year earlier. Analysts on average
expected 83 cents, according to Thomson Reuters I/B/E/S.
[ID:nN18285414]

BNY Mellon reported an operating profit of 55 cents a
share, up slightly from 54 cents a year earlier. Analysts on
average expected 54 cents. [ID:nN19105713]

Shares of BNY Mellon were off 1.1 percent at $26.34 in
morning trading, while State Street fell 0.5 percent to
$41.00.
(Reporting by Elinor Comlay and Svea Herbst; Editing by John
Wallace and Lisa Von Ahn)

WRAPUP 2-BNY, State Street shares fall on rate worries