(Reuters) - Bank of New York Mellon ( BK ) beat Wall Street expectations on Tuesday with a 5% increase in profits, as rising asset values boosted investment services fees, more than offsetting lower interest income for the world's largest custodian bank.

The oldest U.S. bank saw its assets under custody increase as hopes of a soft landing for the economy led to a market rally.

But income from interest on its portfolio of securities, loans and deposits fell. Lower volatility in foreign exchange markets also hurt profits.

"While we are pleased to see early signs of progress, we remain focused on the significant work ahead of us," CEO Robin Vince said.

Rival State Street, which posted results last week, also saw assets under management drive fees, while net interest income declined.

BNY said net income applicable to common shareholders rose to $953 million, or $1.25 per share, in the first quarter, up from $911 million, or $1.13 per share, in the same period last year.

Adjusted net income during the quarter was $1.29 per share, while revenue rose 3%, to $4.53 billion - its highest-ever quarterly revenue on an ongoing operating basis.

Wall Street expected the lender to report adjusted earnings per share of $1.19 on $4.39 billion of revenues, according to LSEG data.

The bank said it had repurchased $988 million worth of shares and its board had authorized a new $6 billion stock buyback program.

Assets under custody or administration jumped 5%, to $48.8 trillion. Noninterest expenses grew 2%, to $3.18 billion.

BNY's shares have risen 5.8% so far this year, versus a 2.4% rise in the KBW Bank Index. According to analysts, the bank has a more diversified business model compared to rivals and is less exposed to seismic market shifts.