Shares in US bank State Street dropped 10 per cent in pre-market trading as quarterly profits missed expectations and fees were hit by subdued markets and reduced assets under management.

The huge custody bank, which is also a large provider of index mutual funds and exchange traded funds, said assets under management in its investment arm dropped 10 per cent to $3.6tn, reflecting both lower markets and net outflows.

Earnings per share of $1.52 were down 3 per cent year on year and missed consensus expectations of analysts polled by Refinitiv.

The bank said total deposits fell 5 per cent in the first quarter to $224bn at the end of March, but its cash management products saw inflows in March, as customers moved money out of banks and into money market funds in search of higher returns.

The results made an anxious start to a week when investors are expecting to hear from dozens of regional and mid-sized banks. They are expected to lay out the damage wrought by last month’s failures of Silicon Valley Bank and two other lenders on the broader financial system.

Last week, some of the US’s biggest banks, JPMorgan Chase, Wells Fargo and Citigroup, announced that they had taken in billions of dollars in deposits from customers fleeing smaller lenders following SVB’s collapse.

Analysts will be looking to see where that influx into big banks came from, and whether the outflows have stabilised. There are also concerns about the impact of much higher interest rates on banks’ loan books and securities holdings.

M&T Bank reported on Monday that total deposits had declined 3 per cent from $163.5bn at the end of 2022 to $159.1bn, which the Buffalo-based lender attributed to customers shifting to money market funds and other financial products.

At State Street, revenue rose slightly year on year to $3.1bn, in line with analysts’ forecasts. Higher net interest income, the gap between what the bank pays to depositors and what it charges for loans, partly compensated for a 9 per cent drop in fees.

Chief executive Ron O’Hanley said the results “reflect the resiliency of our business model, notwithstanding continued interest rate increases and subsequent significant market movements, volatility and disruption within other parts of the banking industry . . . We expect revenue growth in the coming quarter.”

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