(Bloomberg News) State Street Corp., the third-largest custody bank, reported third-quarter operating profit that beat analysts' estimates as it earned higher fees for managing client money.

Net income on an operating basis declined 0.6 percent to $473 million, or 99 cents a share, from $476 million, or 96 cents, a year earlier when there were more shares outstanding, the Boston-based company said today in a statement. The results, which exclude certain items, beat the average estimate of 96 cents a share of 22 analysts surveyed by Bloomberg.

"They've done generally all right in winning new customers, but the interest rate environment has just been stagnant, more than anything," Marty Mosby, a Memphis, Tennessee-based equity analyst at Guggenheim Securities LLC, said in an interview before results were announced.

State Street Chief Executive Officer Joseph Hooley, struggling to boost growth in a low-interest rate environment, has sought to increase shareholder returns by repurchasing shares, raising the firm's dividend and cutting jobs. Four large investors, frustrated with State Street's share performance, have pushed the company's board to replace Hooley or Chief Financial Officer Edward Resch, according to a report yesterday in the Financial Times.

State Street rose 1.7 percent to $42.27 at 9:56 a.m. in New York. State Street gained 3.2 percent this year through yesterday, compared with a 16 percent advance by rival Bank of New York Mellon Corp. and a 15 percent increase by the Standard & Poor's 20-company index of asset managers and custody banks.

"We think the stock could trade up slightly today given fairly depressed expectations and core revenue trends that were reasonably good versus investor fears," Brian Bedell, a New York-based equity analyst with ISI Group Inc., wrote in a research note published today.

Assets Rise

State Street's custody assets climbed 10 percent to $17.3 trillion after global stocks rose 18 percent in the year ended Sept. 30 as measured by the MSCI ACWI Index. The amount of money the firm manages for investors rose 11 percent to $2.1 trillion.

Revenue from investment-management fees rose 9.6 percent, while those from custody servicing fell 0.5 percent. Sales in the third quarter declined 2.7 percent to $2.35 billion, hurt by a 44 percent decrease in foreign-exchange fees to $115 million.

"Although equity markets have improved, clients remain conservative in their investment allocations, which adversely affects our revenue," Hooley said in the statement.

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