What happened

State Street Corp. (STT 0.45%) surged higher on Friday after posting second-quarter earnings that beat analysts' estimates. The stock kept moving higher as the day went on, up 11.1% at 2:37 p.m. ET to about $66.46 per share. It was up about 9.5% at 3:44 p.m. ET.

Overall, it was a good day on the markets as the S&P 500 was up 1.7% and the Dow Jones Industrial Average was up 592 points, as of 3:45 p.m. ET.

So what

State Street's gains can be attributed to its solid second-quarter earnings report, released this morning. It comes one day after other large financial services firms, JPMorgan Chase and Morgan Stanley, missed estimates.

Revenue was down 3% year over year to $2.95 billion while net income fell 2% to $747 million for State Street, a leading custody bank and investment manager. Earnings per share (EPS) were $1.94 (excluding non-GAAP notable items), which beat estimates of $1.85. However, revenue fell slightly short of some estimates.

The company saw a 25% year-over-year increase in net interest income (NII) and a 15% NII increase over the first quarter, due to higher interest rates. This offset fee revenue losses in its investment servicing and asset management businesses. Also, expenses were flat, and its capital position improved with a common equity tier 1 ratio of 12.9% -- up 1.7 basis points.

In addition, State Street boosted its quarterly dividend 10% to $0.63.

Now what

There are a couple of things to look forward to in the third quarter if you're a State Street investor. One, the company expects a 5% to 9% increase in NII in the third quarter, over the second quarter, due to rising rates. For the year, it expects a 24% to 27% increase in annual NII revenue, up from previous guidance of 18% to 20%.

Also, the company's planned, but delayed, acquisition of rival custody bank Brown Brothers Harriman Investor Services could be resolved. State Street CEO Ron O'Hanley reported on the company's earnings call that it is working with regulators to modify the transaction structure in a way that "the parties believe present a path forward." They expect to finalize the structure in Q3 and close the deal by the end of the year.