The country's two largest custody banks said they will keep looking for acquisitions, of whatever size, as they wait for higher interest rates to spur organic growth.
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Robert Kelly, BNY Mellon's chairman and chief executive officer, said during the company's quarterly earnings conference call Tuesday it plans to raise $700 million in equity that would be used to "fund purchases and give us additional capital."
Kelly added, "I would think we are more or less done for the year except perhaps something small outside of the U.S."
BNY Mellon announced buyout deals in February — for
Hooley, who became CEO on March 1 after Ronald E. Logue retired, said State Street plans to continue targeting "high-growth" segments, including alternative asset management, and deals outside of the United States.
"We are not necessarily looking for large deals or smalls, but at clearly defined strategies," Hooley said. "We are offering a broad range of services across the globe. When there are opportunities to make an acquisition, we plan to be aggressive."
In December State Street announced deals to buy Intesa Sanpaolo's securities services business, for $1.87 billion, and a European fund administrator, Mourant International Finance Administration, to expand the company's alternative servicing capabilities.
"You are not going to immediately see an impact on quarterly results, but over time, they are going to give us opportunities to cross-sell and add scale," Hooley said.
State Street announced Tuesday that its first-quarter profit increased 4%, to $495 million, or 99 cents a share, from a year earlier as revenue rose 15%, to $2.3 billion.
BNY Mellon's profit rose 74%, to $559 million, or 46 cents a share. Gibbons said a surge in assets was a result of securities losses in last year's first quarter. BNY Mellon had moderate securities gains this quarter and "asset management continues to gain nicely," he said.
"It feels like the credit environment is improving," Gibbons said. "Credit quality continues to improve."
Kelly called it an "encouraging quarter."
Both companies said the low interest rate environment remains a challenge as they look to generate fee revenue. BNY Mellon's fee revenue increased 5% year over year, to $2.56 billion. Net interest revenue fell 1%, to $765 million, year over year but rose 6% from the previous quarter. "Our business model is levered to rates levering up," Kelly said. "We haven't seen that yet."
Hooley characterized 2010 a "transition year." "We expect interest rates to tighten, and that will be good news for us," he said.