State Street Corp. earns its money a penny at a time. The company keeps tabs on $6.2 trillion, or 10% of the world's assets, earning pennies for every $1,000 it baby-sits. So how come its 17% profit growth is about one-third faster than most major banks?
The answer has to do with the creative ways State Street finds to develop Net-savvy services for some of the world's largest institutional investors. Take GlobalLink. The online service provides foreign-exchange traders with a vast database on foreign currency flows, covering the 12% of the currency market that State Street already handles. It saves traders money and time by cutting out middlemen. Other State Street Web services help pension-fund managers and traders in corporate and government bonds and mutual funds watch their dough. Can State Street keep growing so fast? A bear market or a sudden drop in trading volume could hurt the firm's profits. But State Street is aiming to sustain its edge through more innovation. On the drawing board: A next-generation trading system that would allow foreign-currency auctions to be carried out using instant-messaging technology. That way State Street can keep the pennies rolling in.