State Street Corporation · NYSE:STT
State Street — Q4 2023 Earnings Presentation
27 slides from State Street's earnings presentation, Jan 19, 2024
Slide 1: 4Q23 and FY 2023 Financial Highlights
= STATE —= STREET 4Q23 and FY 2023 Financial Highlights “= January 19, 2024
Slide 2: Presentation notice and forward-looking statements
This presentation (and the conference call accompanying it) includes certain highlights of, and also material supplemental to, State Street Corporation’s news release announcing its fourth quarter and full year 2023 financial results. That news release contains a more detailed discussion of many of
Slide 3: FY2023 financial performance and business momentum
All comparisons are to FY2022 unless otherwise noted • EPS of $5.58, down (22)%; $7.66 ex-notables, up 3%A • Total revenue of $11.9B, down (2)%; up 1% ex-notablesA Financial • Expenses of $9.6B, up 9%; up 3% ex-notablesA performance • Returned $4.6B of capital in 2023, consisting of $3.8B in common
Slide 4: 4Q23 financial performance and business momentum
All comparisons are to corresponding prior year period unless otherwise noted • EPS of $0.55, down (71)%; $2.04 ex-notable items, down (1)%A • Total revenue of $3.0B, down (4)%; down (3)% ex-notablesA – Fee revenue flat; up 1% ex-notables, reflecting higher Management fees, Front office software and
Slide 5: Notable items in 4Q23
QuartersA ($M, except EPS data) 4Q22 3Q23 4Q23 FDIC special assessment of $387M FDIC special assessment - - ($387) • $387M related to the special assessment from the FDIC reflected in Other expenses Net repositioning chargesB ($70) - (203) Net repositioning charges of $203M • $182M related to Compen
Slide 6: Revenue summary
(GAAP; $M, except EPS data, or where Quarters %∆ Full Year otherwise noted) 4Q22 3Q23 4Q23 3Q23 4Q22 2022 2023 %∆ Revenue: Back office servicing fees $1,115 $1,138 $1,128 (1)% 1% $4,714 $4,561 (3)% Middle office services 88 96 84 (13) (5) 373 361 (3) Servicing fees 1,203 1,234 1,212 (2) 1 5,087 4,92
Slide 7: AUC/A, AUM, market indices and industry flows
9 Market indices 2 AUC/A ($T, as of period-end) 4Q23 vs (% change) +14% 3Q23 4Q22 Equity & Bond Indices: +4% EOP 11% 24% S&P 500 Daily Avg 0 16 EOP 10 15 $40.0 $41.8 • Up 14% YoY and 4% QoQ largely driven MSCI EAFE Daily Avg (2) 12 $36.7 by higher quarter-end market levels and MSCI EM EOP 7 7 net ne
Slide 8: Servicing fees
Servicing fees ($M) 4Q23 performance Total $3,155 $3,101 $3,110 $2,691 YoY -4% $3,043 QoQ +13% Servicing fees of $1,212M up 1% YoY and down (2)% QoQ; revenue flat YoY ex-FXA • Up 1% YoY primarily from higher average equity market levels, +1% partially offset by pricing headwinds, lower client -2% ac
Slide 9: Management fees
Management fees ($M) 4Q23 performance Total $3,155 $3,101 $3,110 $2,691 YoY -4% $3,043 QoQ +13% Management fees of $479M up 5% YoY and flat QoQ; revenue up 4% YoY ex-FXA • Up 5% YoY primarily due to higher average equity market levels, partially offset by a previously described shift of certain mana
Slide 10: Markets, Software & processing, and Other fees
Markets, Software & processing, and Other fees (Ex-notable items, non-GAAP, $M)A 4Q23 performance Total YoY -4% • FX trading services of $307M Revenue $3,155 $3,101 $3,110 $2,691 $3,043 QoQ +13% (GAAP) – Down (11)% YoY mainly due to lower spreads associated with subdued FX volatility, partially offs
Slide 11: Front office software and data
A Front office software and data ($M) Future growth driven by Front, Middle and Alpha Total YoY -4% ($M) 4Q22 3Q23 4Q23 $3,155 $3,101 $3,110 $2,691 $3,043 QoQ +13% revenue Front office metrics +13% +38% New bookings16 $21 $10 $32 $179 $162 ARR6 272 299 315 $159 52 Uninstalled revenue backlog17 97 88
Slide 12: NII and NIM, average balance sheet highlights
19 NII and NIM ($M) A Average balance sheet highlights ($B) Total YoY -4% 4Q22 1Q23 2Q23 3Q23 4Q23 $3,155 $3,101 $3,110 $2,691 $3,043 QoQ +13% revenue Total assets $284 $277 $275 $268 $279 -14% +9% Cash20 87 81 73 66 75 Investment portfolio 106 107 108 105 103 $791 $766 $691 $678 $624 HTM % (EOP) 61
Slide 13: Expenses
Expenses 4Q23 performance A (Ex-notable items, non-GAAP, $M) (Ex-notable items, non-GAAP, $M)A +2% Expenses of $2,202M up 2% YoY and 1% QoQ; up 1% YoY ex-FXA +1% • Compensation and employee benefits of $1,065M $2,155 $2,180 $2,202 – Up 1% YoY mainly due to higher salaries and employee benefits, part
Slide 14: Capital and liquidity highlights
7 Ratios (%, as of period-end) Capital and liquidity highlights CET1 (Standardized) • 4Q23 standardized CET1 ratio at quarter-end of 11.6% increased 0.6%pts QoQ primarily driven by episodically lower RWA and an 13.6% 12.1% 11.8% 11.6% improvement in AOCI, partially offset by the continuation of comm
Slide 15: FY2023 Review and FY2024 Outlook
A FY2023 Review FY2024 Outlook Operating • Low single digit average global equity markets growth • Expect global equity markets flat to December 2023 EOP which Environment translates to average global equity markets up ~10% YoY • Fed Funds rate reached 5.50%, ECB rate reached 4.00%, BOE rate reached
Slide 16: Expense outlook and productivity plans
Expense outlook Ex-notables, non-GAAPA Expenses and Productivity PlansA +~2.5% • Expect 5th consecutive year of business growth-focused investments fully or partially offset by productivity and expense ~4-5% ~(5-6)% transformation ~1-2% ~0.5% $8,963M ~1% ~1.7x vs. • Planned acceleration of investmen
Slide 17: Appendix
—_ STATE = STREET.
Slide 18: Appendix contents
4Q23 line of business performance 19 FY2023 line of business performance 20 Reconciliation of notable items 21 Reconciliation of constant currency impacts 22 Endnotes 23 Forward-looking statements 25 Non-GAAP measures 26 Definitions 27 18
Slide 19: 4Q23 line of business performance
Investment Servicing Investment Management State StreetA Total revenue YoY % ∆ Total revenueB YoY % ∆ Total revenue ex-notable itemsC YoY % ∆ $2,630M $3,132M $3,043M -3% $2,498M -5% Fee 1,839 $545M +9% Fee revenue 1,827 -1% $502M 2,341 2,365 revenue +1% NII 791 671 -15% 791 NII 678 -14% 4Q22 4Q23 4Q
Slide 20: FY2023 line of business performance
Investment Servicing Investment Management State StreetA Total revenueB YoY % ∆ Total revenueC YoY % ∆ Total revenue ex-notable itemsD YoY % ∆ $10,139M $10,160M Flat $12,125M $12,239M +1% Fee $2,079M Fee 7,590 7,420 7,420 -2% $1,986M +5% 9,480 -1% revenue 9,583 revenue NII 2,551 2,740 +7% NII 2,544
Slide 21: Reconciliation of notable items
Quarterly reconciliation % Change Year-to-Date % Change 4Q23 4Q23 YTD 2023 vs. vs. vs. (Dollars in millions, unless noted otherwise) 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 4Q22 3Q23 2022 2023 YTD 2022 Total revenue, GAAP-basis $ 3,081 $ 2,953 $ 2,959 $ 3,155 $ 3,101 $ 3,110 $ 2,691 $ 3,043 (3.5)% 1
Slide 22: Reconciliation of constant currency FX impacts
Currency Translation Excluding Currency % Change Constant Reconciliation of Constant Currency FX Impacts Reported Impact Impact Currency 4Q23 4Q23 4Q23 4Q23 4Q23 4Q23 vs. vs. vs. vs. vs. vs. (Dollars in millions) 4Q22 3Q23 4Q23 4Q22 3Q23 4Q22 3Q23 4Q22 3Q23 Non-GAAP basis Total revenue, excluding no
Slide 23: Endnotes
1. Servicing fee revenue wins/backlog represents estimates of future annual revenue associated with new servicing engagements State Street determines to be won during the current reporting period based upon factors assessed at the time the engagement is determined by State Street to be won, includin
Slide 24: Endnotes (continued)
14. In March 2023, the Financial Accounting Standards Board issued new accounting guidance that expands the use of proportional amortization accounting to other types of tax credit investments regardless of the tax credit program from which the income tax credits are received. We adopted the new sta
Slide 25: 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 strategy, growth and sales prospects, capital management, business, financial and
Slide 26: 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-GAAP presentation.
Slide 27: Definitions
ACWI All Country World Index AOCI Accumulated other comprehensive income ARR Annual recurring revenue AUC/A Assets under custody and/or administration AUM Assets under management Bloomberg Global Aggregate Bloomberg Global Aggregate represents Bloomberg Global Aggregate Bond Index BOE Bank of Englan