State Street Corp. Friday beat profit estimates for the second quarter as the bank's interest income benefited from the U.S. Federal Reserve's policy tightening and assets under management rose amid a recovery in the equity markets.

The Fed, in line with the major central banks, has hiked lending rates rapidly to curb stubborn inflation, which translated to higher profits for banks that typically thrive in a high-interest rate environment.

Banking giants JPMorgan Chase and Wells Fargo also saw profits climb in the second quarter on the back of higher interest income.

State Street said its net interest income climbed 18% in the three months ended June 30 to $691 million.

Meanwhile, the broader markets that had slumped in 2022 due to geopolitical turmoil and rate-hike jitters have revived this year as worries around a looming economic slowdown ease. The S&P 500 has risen 17.5% so far in 2023.

Assets under custody or administration (AUC/A) at State Street rose 4% in the reported quarter to $39.59 trillion from a year earlier, driven by higher quarter-end equity market levels and client flows, while assets under management climbed 9% to $3.8 trillion.

Profit came in at $2.17 per share, beating analysts' average expectations of $2.10 per share, according to IBES data from Refinitiv.

Shares of the custodian bank, however, fell 2.8% in premarket trading as State Street missed revenue estimates. Total revenue climbed 5% to $3.11 billion, below estimates of $3.14 billion amid a drop in servicing, management and FX trading fees.

Deposits at the bank fell to $206 billion, down about 2% sequentially and nearly 10% compared to a year earlier.