GLOBAL - State Street Corp. says it expects "downward pressure" on revenues in the short term - and costs related to its European outsourcing business.

"We expect to face downward pressure on revenue in the short term, due to anticipated increases in interest rates, among other things," said new chief executive Ron Logue. "We also expect to incur implementation expenses related to converting several large new customers in Europe."

State Street spokeswoman Hannah Grove said this referred to recent outsourcing wins in Europe.

"It's typical in these deals that there will be upfront expenses in converting but it's in keeping with our usual approach in terms of investing in the future and having the full spectrum of capabilities to support our clients." She did not put a figure on the expenses.

Logue said that "continued improvement above initial expectations" for its 1.5 billion-dollar acquisition of the Deutsche Bank Global Securities Services business was "expected to partially offset these increases".

The bank said it has completed about 80% of worldwide client conversions for GSS and added that it expects to be "substantially complete" by the end of 2004, excluding Germany.

The comments came as the Boston-based group announced second-quarter net income of 220 million dollars, up from 23 million dollars in the year-ago quarter. Revenue was up to 1.29 billion dollars from 1.08 billion dollars.

Logue said: "Favorable market conditions in the first quarter continued into the second, helping us to achieve record operating revenue. The results of the second quarter were solid due to strong revenue growth across all segments of our business."

Management fees generated by asset management arm State Street Global Advisors rose 38% to 153 million dollars - it said the rise reflected new business from existing and new clients and higher equity markets. Total assets under management rose 35% to 1.2 trillion dollars.

Servicing fees rose 18% to 570 million dollars - "attributable to new business from existing and new clients and to higher equity market valuations in 2004". Total assets under custody rose seven percent to 9.1 trillion dollars.