(Bloomberg) -- State Street Corp., the third- largest custody bank, said second-quarter profit climbed 16 percent as rising global equity markets lifted the value of the assets it oversees.

Net income on an operating basis increased to $571 million, or $1.24 a share, from $494 million, or $1.01, a year earlier, the Boston-based company said today in a statement. Excluding certain items, 22 analysts surveyed by Bloomberg expected earnings of $1.18 cents a share on average.

“Higher custody assets and investment management assets will translate into high fees,” Justin Fuller, an analyst at Fitch Ratings Ltd. in Chicago, said in an interview before results were released. “They’ve also done a pretty good job on the expense side.”

State Street, led by Chief Executive Officer Joseph L. Hooley, has led a rally among the three largest independent U.S. custody banks, gaining 49 percent this year through yesterday amid aggressive efforts over the past two years to cut costs and return capital to shareholders. State Street raised its dividend twice in the past 16 months and increased the size of its share repurchase program in March.

Assets under custody increased 15 percent from a year earlier to $18.9 trillion after the Standard & Poor’s 500 Index of U.S. stocks rose 18 percent in the 12 months ended June 30, and global stocks, as measured by the MSCI ACWI Index, advanced 14 percent.

The company resolved its search for a chief financial officer in June, naming Michael W. Bell, former CFO at Toronto- based insurer Manulife Financial Corp., to replace Edward Resch, who plans to retire in August.

Custody Banks

Bank of New York Mellon Corp., the world’s largest custody bank, said July 17 its second-quarter profit rose 79 percent to $833 million, or 71 cents a share, a year after costs from a legal settlement hurt earnings.

Northern Trust Corp., based in Chicago, said July 17 its net income climbed 6.2 percent to $187.9 million, or 78 cents a share.

State Street’s results were announced before the start of regular U.S. trading. The company’s operating profit excludes money earned from the sale or maturing of bonds whose value was written down in May 2009, which the company records as “discount accretion” within net interest income.

Custody banks keep records, track performance and lend securities for institutional investors including mutual funds, pension funds and hedge funds. State Street also manages investments for individuals and institutions.

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