State Street’s Earnings Beat Expectations. Why the Stock Is Falling Anyway.

State Street stock was lower following earnings for a second consecutive quarter. (Adam Glanzman/Bloomberg)

Key Points

• State Street’s third-quarter earnings of $2.78 per share and revenue of $3.55 billion exceeded analyst expectations.
• Net interest income for State Street declined 2% from the previous quarter and 1% from the prior year, a shift the company attributed to lower short-term interest rates.
• Shares of State Street fell 4.8% to $107.50 on Friday, marking a second consecutive decline following an earnings report.

Shares of State Street sank Friday even after the bank and asset- management company reported better-than-expected quarterly earnings.

State Street posted earnings of $2.78 a share for the third quarter, surpassing analysts’ consensus estimate of $2.64. Revenue totaled $3.55 billion, up around 9% from the year prior and ahead of Wall Street’s call for $3.46 billion.

Investors may have been disappointed by a drop in net interest income, which fell 2% from last quarter and 1% from last year. Analysts polled by FactSet had expected interest income to rise slightly in the quarter.

State Street blamed the decline on lower average short-term interest rates and changes in the mix of deposits.

The stock was down 4.8% to $107.50 on Friday, putting it on pace for its lowest close since July 17, according to Dow Jones Market Data.

Shares have climbed around 10% this year, but Friday marks a second consecutive decline following earnings. State Street stock fell in July after earnings fell short of expectations.

Write to Nate Wolf at nate.wolf@barrons.com