(Adds details on expenses, analyst quote; updates shares)
April 20 (Reuters) - Custodian bank State Street Corp on Friday posted a slightly better-than-expected quarterly profit helped by higher asset servicing and management fees, but investors focused on an increase in expenses, sending its shares down about 5 percent.
Expenses rose 8.15 percent to $2.26 billion, mostly to support new investments.
"The expenses in the first-quarter are mostly temporary but the market is looking at them as a headwind" said Marty Mosby, analyst at Vining Sparks.
Expenses at rival Bank of New York Mellon Corp rose 3.7 percent in the first quarter.
Servicing fees rose 9.6 percent to $1.42 billion, while management fees rose 23.6 percent to $472 million.
As a custodian bank, State Street gets most of its revenue from managing money of customers such as big banks and hedge funds as well as managing investments for clients.
Assets under custody and administration rose 11.57 percent to a $33.28 trillion, while total fee revenue rose 7.5 percent to $2.36 billion.
Net income available to common shareholders rose to $605 million, or $1.62 per share, from $446 million, or $1.15 per share, a year ago.
Analysts on an average expected State Street to reports earnings of $1.59 per share, according to Thomson Reuters I/B/E/S.
Net interest income rose 29 percent to $658 million
U.S. banks have greatly benefited from seven interest rate hikes by the Fed since 2015. (Reporting by Diptendu Lahiri in Bengaluru Editing by Saumyadeb Chakrabarty, Supriya Kurane)