BOSTON (Reuters) - Custody bank State Street Corp forecast quarterly operating earnings would easily top Wall Street forecasts, sending its shares up 10.5 percent and boosting the broader market.
Bank stocks rallied after heavy losses in recent weeks, with the KBW bank index <.BKX> up 1.8 percent. State Street's forecast reinforced expectations that banks without exposure to trading would perform well in the coming earnings season.
State Street said second-quarter operating earnings would be 93 cents a share, handily beating analysts' average forecast of 72 cents as compiled by Thomson Reuters I/B/E/S.
The company offered only a preview of its earnings, leaving analysts to wait for its full report, due July 20, to learn exactly why results were so strong.
State Street rivals Northern Trust Corp
State Street, which earns fees for offering services like record-keeping to mutual and hedge funds, also said it would take a one-time charge of $251 million, or 50 cents per share, in the quarter for an injection of money to support trust funds that its money management arm offers.
Analysts welcomed the move, saying State Street had tackled a long-time problem quickly after a new chief executive took over in March.
"Today's announcement demonstrates our commitment to resolving the challenges resulting from market turmoil over the past several years," said Joseph Hooley, who succeeded Ronald Logue as CEO on March 1.
State Street injected $330 million into the collateral pools held by its State Street Global Advisors securities lending funds. The move will allow it to lift redemption restrictions, in place since October 2008, starting next month. This is expected to reduce "potential liability concerns," the company said.
Last month a team of eight, including Craig Starble, who had led the securities finance unit, quit State Street. The company is suing some of the eight.
State Street said it expects second-quarter operating revenue of $2.2 billion, in line with analysts' expectations.
The bank also said it would record a one-time tax benefit of $180 million, or 36 cents per share, because of restructuring non-U.S. assets.
State Street shares, down 23 percent this year through Monday, were up 10.5 percent to $36.84 in morning trading.
(Reporting by Svea Herbst-Bayliss and Elinor Comlay, editing by Gerald E. McCormick and John Wallace)
