State Street Corporation · NYSE:STT
State Street — Q4 2020 Earnings Presentation
23 slides from State Street's earnings presentation, Jan 19, 2021
Slide 1: 4Q 2020 Financial Highlights
January 19, 2021 4Q 2020 Financial Highlights (NYSE: STT)
Slide 2: Preface and forward-looking statements
Preface and forward-looking statements This presentation includes certain highlights of, and also material supplemental to, State Street Corporation’s news release announcing its fourth quarter and full year 2020 financial results. That news release contains a more detailed discussion of many of the
Slide 3: 4Q20 and FY2020 highlights
4Q20 and FY2020 highlights All comparisons are to corresponding prior year periods unless noted otherwise 4Q20 FY2020 • EPS of $1.39; $1.69 ex-notable itemsA • EPS of $6.32; $6.70 ex-notable itemsA • Total revenue of $2.9B, down (4)% reflecting: • Total revenue of $11.7B, ~flat YoY reflecting: Finan
Slide 4: 4Q20 notable items
4Q20 notable items A Quarters ($M, except EPS data) 4Q19 3Q20 4Q20 Repositioning charges of $133M Repositioning charges: • Compensation and employee benefit costs of $82M associated with Compensation & employee benefits $(98) - ($82) automation of processes and organizational simplification enabling
Slide 5: Summary of 4Q20 and FY2020 results
Summary of 4Q20 and FY2020 results FY2020 reflects growth in EPS, ROE and pre-tax margin, as well as positive operating leverage Quarters %∆ Full Year (GAAP, $M, except EPS data, or where otherwise noted) 4Q19 3Q20 4Q20 4Q19 3Q20 2019 2020 %∆ Revenue: Servicing fees $1,299 $1,301 $1,307 0.6% 0.5% $5
Slide 6: AUC/A and AUM levels, markets and flows performance
AUC/A and AUM levels, markets and flows performance A AUC/A and AUM Market indices7 AUC/A ($T, as of period-end) (% change) 4Q20 vs • 13% increase from 4Q19 primarily 4Q19 3Q20 +13% driven by: EOP 16% 12% +6% S&P 500 – Higher period-end market levels, net new Daily Avg 15 7 business growth, and clie
Slide 7: Revenue: Servicing fees
Revenue: Servicing fees Servicing fees ($M) 4Q20 performance Total YoY -4% Servicing fees of $1,307M up 1% YoY and flat QoQ revenue $3,048 $3,065 $2,937 $2,784 $2,917 QoQ +5% 4Q20 performance included growth in Alternative, Asset Owner, Insurance and Official Institution client segments offset prima
Slide 8: Revenue: Management, Markets, Software and processing fee revenue
Revenue: Management, Markets, Software and processing fee revenue Management, Markets, Software & processing fee ($M) 4Q20 performance Total YoY -4% Management, Markets, Software and processing fee revenue $3,048 $3,065 $2,937 $2,784 $2,917 QoQ +5% revenue of $1,109M up 4% YoY and up 10% QoQ +4% • M
Slide 9: CRD and State Street Alpha
CRD and State Street Alpha CRD financial performance CRD and Alpha highlightsA A (Standalone basis, $M) -9% CRD +14% • 4Q20 revenue of $115M +16% – Down (9)% YoY primarily due to several large prior $126 $459 period on-prem renewals, partially offset by higher $115 software-enabled revenue (+20% YoY
Slide 10: Revenue: Net interest income
Revenue: Net interest income NII and NIM ($M)16 Average balance sheet highlights ($B) Total YoY -4% revenue $3,048 $2,784 $2,917 QoQ +5% 4Q19 3Q20 4Q20 -22% Total assets $229 $264 $277 +4% EOP 246 272 315 Flat ex-true-upA Loans 25 26 28 $636 $478 EOP 26 27 28 $498 ex- $499 true-up Investment portfol
Slide 11: Expenses
Expenses Expenses 4Q20 performance A (Ex-notable items, non-GAAP, $M) (Ex-notable items, non-GAAP)A Expenses ex-notable items of $2,131M flat YoY and up Flat 2% QoQ 18 +2% • Compensation and benefits of $1,047M – Flat YoY as lower headcount in high cost locations and contractor $2,128 $2,097 2,131 s
Slide 12: Investment portfolio and capital ratios
Investment portfolio and capital ratios Investment portfolio highlights19 Capital ratios3 ($B, portfolio metrics as of period-end) (%, as of period-end) CET1 (Standardized) 11.7% 12.4% 12.3% A Headroom 4.3% $112 $111 1.0% G-SIB surcharge 2.5% SCB $96 $16 15% $17 16% 8.0% ~$5B MMLF 4.5% Minimum ratio
Slide 13: Summary
Summary All comparisons are to corresponding prior year periods unless noted otherwise 4Q20 financial review • EPS of $1.39, up 3%; Pre-tax margin of 22.0%, up 1.1%pts; ROE of 8.4% • EPS ex-notable items of $1.69, down (15)%A – Fee revenue of $2.4B, up 2%, primarily driven by elevated FX trading act
Slide 14: FY2021 Outlook
FY2021 Outlook FY2020 review FY2021 outlook • Equity market period-end levels: S&P 500 up 16%; MSCI EAFE up 5% • Equity market period-end growth, up 7-8% Operating • Fed Funds rate cuts to near zero • Normalizing FX market volatility following spike in 2020 environment • Average 10Y US Treasury rate
Slide 15: Medium term financial targets affirmed but timing adjusted
Medium term financial targets affirmed but timing adjusted two years to the end of 2023 (for FY2024) driven by significant shifts in the interest rate environment A • NII was impacted by a ~200bp decline in interest rates, including 5 Fed Funds rate cuts since the end of 2018 – Holding all else equa
Slide 16: Appendix
FY2020 Fee revenue, NII and Expenses 17 FY2020 line of business performance 18 Reconciliation of notable items 19 Appendix Endnotes 20 Forward-looking statements 21 Non-GAAP measures 22 Definitions 23 16
Slide 17: FY2020 Fee revenue, NII and Expenses
FY2020 Fee revenue, NII and Expenses A Fee Revenue NII Expenses ex-notables +3.8% YoY YoY $9,499M %∆ -1.5% %∆ $9,147M $8,675M $8,542M -14.3% $2,566M Servicing 5,167 +1.8% 5,074 $2,200M Comp. 4,443 fees & benefits 4,368 -1.7% Information Management 1,880 +3.1% 1,465 1,550 +5.8% 1,824 systems Fees9 Tr
Slide 18: FY2020 line of business performance
FY2020 line of business performance Investment Servicing Investment Management State Street Total revenueA YoY % ∆ Total revenue YoY % ∆ Total revenueA YoY % ∆ $11,756M $11,703M -0.5% $9,834M $9,729M -1.1% $1,974M +2.7% Fee $1,922M 9,147 9,499 +3.8% Fee revenue 7,201 7,514 +4.3% revenue NII 2,590 2,
Slide 19: Reconciliation of notable items
Reconciliation of notable items Quarterly reconciliation % Change Year-to-Date % Change 4Q20 4Q20 YTD2019 YTD2020 vs. vs. vs. vs. (Dollars in millions, unless noted otherwise) 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 4Q19 3Q20 2018 2019 2020 YTD2018 YTD2019 Total revenue, GAAP-basis 2,932 2,873 2,903
Slide 20: Endnotes
Endnotes 1. New asset servicing mandates, including announced front-to-back investment servicing clients, may be subject to completion of definitive agreements, approval of applicable boards and shareholders and customary regulatory approvals. New asset servicing mandates and servicing assets remain
Slide 21: Forward-looking statements
Forward-looking statements This presentation (and the conference call referenced herein) contains forward-looking statements within the meaning of United States securities laws, including statements about our goals and expectations regarding our business, financial and capital condition, results of
Slide 22: Non-GAAP measures
Non-GAAP measures In addition to presenting State Street's financial results in conformity with U.S. generally accepted accounting principles, or GAAP, management also presents certain financial information on a basis that excludes or adjusts one or more items from GAAP. This latter basis is a non-G
Slide 23: Definitions
Definitions A&R Acquisition and restructuring ARR Annual recurring revenue AUC/A Assets under custody and/or administration AUM Assets under management Barclays Agg Barclays Agg represents Barclays Global Aggregate Bond Index Bps Basis points, with one basis point representing one hundredth of one p