State Street Corporation · NYSE:STT
State Street — Q1 2015 Earnings Presentation
30 slides from State Street's earnings presentation, Apr 24, 2015
Slide 1: First-Quarter 2015 Financial Highlights
State Street Corporation First-Quarter 2015 Financial Highlights April 24, 2015
Slide 2: Forward-Looking Statements
This presentation includes certain highlights of, and also material supplemental to, State Street Corporation’s (State Street’s) news release announcing its first-quarter 2015 financial results. That news release contains a more detailed discussion of many of the matters described in this presentati
Slide 3: Focused strategy supports long-term financial goals
Focused strategy supports long-term financial goals LONG-TERM SHAREHOLDER VALUE Operating-Basis1 Financial Goals: Revenue Growth of 8%-12%, EPS Growth of 10%-15% and ROE of 12%-15% BUILDING ON ACHIEVING A INVESTING IN OPTIMIZING OUR STRONG DIGITAL OPPORTUNITIES CAPITAL CORE ENTERPRISE FOR GROWTH Ali
Slide 4: Summary of GAAP-Basis Results
Summary of GAAP-Basis Results % change vs 1Q15 $ in millions, except per share data 1Q14 2Q14 3Q14 4Q14 1Q15 1Q14 4Q14 Revenue $ 2,485 $ 2,598 $ 2,582 $ 2,630 $ 2,605 4.8% (1.0%) Expenses 2,028 1,850 1,892 2,057 2,097 3.4 1.9 Earnings per share (EPS) 0.81 1.38 1.26 1.12 0.90 11.1 (19.6) Return on av
Slide 5: GAAP-Basis Revenue
GAAP-Basis Revenue % change vs 1Q15 $ in millions 1Q14 2Q14 3Q14 4Q14 1Q15 1Q14 4Q14 Servicing fees $ 1,238 $ 1,288 $ 1,302 $ 1,301 $ 1,273 2.8% (2.2)% Management fees 292 300 316 299 301 3.1 0.7 Trading services 253 260 278 293 324 28.1 10.6 Securities finance revenue 85 147 99 106 101 18.8 (4.7) P
Slide 6: GAAP-Basis Expenses
GAAP-Basis Expenses % change vs 1Q15 $ in millions 1Q14 2Q14 3Q14 4Q14 1Q15 1Q14 4Q14 Compensation and employee benefits $ 1,157 $ 978 $ 953 $ 972 $ 1,087 (6.1%) 11.8% Information systems and communications 244 244 242 246 247 1.2 0.4 Transaction processing services 191 193 199 201 197 3.1 (2.0) Occ
Slide 7: Progress in 1Q15 on key priorities
Progress in 1Q15 on key priorities: growing revenue, managing expenses and returning capital to shareholders 1Q15 Operating-Basis (Non-GAAP) Financial Highlights1 • EPS: – Operating-basis EPS1 of $1.17 increased 18% from 1Q14 and decreased 15% from 4Q14 – Compared to 4Q14, pre-tax expenses and EPS i
Slide 8: Solid growth in operating-basis EPS
Solid growth in operating-basis EPS1 from 1Q14 to 1Q15 driven by revenue growth and impact of share buyback Operating-Basis (Non-GAAP) Results1 Operating-Basis EPS1 ($) 1Q15 vs 1Q14 +18.2% 1.39 1.35 1.37 1.17 0.99 • EPS decreased in 1Q15 from 4Q14 primarily driven by the seasonal deferred incentive
Slide 9: Operating-basis revenue growth from 1Q14 to 1Q15
Operating-basis revenue1 growth from 1Q14 to 1Q15 driven by strong fee revenue growth despite stronger U.S. dollar Operating-Basis (Non-GAAP) Results1 Notable items in 1Q15: Operating-Basis Revenue1 • Money market fee waivers of $10.7M • Performance fees of $1.5M ($M) Notable variances 1Q15 vs 1Q14:
Slide 10: Operating-basis NIR continues to be challenged
Operating-basis NIR1 continues to be challenged in the prolonged low interest-rate environment Operating-Basis (Non-GAAP) Results1 Operating-Basis Average Earning Assets1 ($B) 1Q15 vs 1Q14 1Q15 vs 4Q14 +20.9% +0.9% • Average earning assets continued to increase; operating-basis NIM1 continued to dec
Slide 11: Managing expenses and stronger U.S. dollar limited growth
Managing expenses and stronger U.S. dollar limited operating-basis expense1 growth to 1% from 1Q14 to 1Q15 Operating-Basis (Non-GAAP) Results1 Notable items in 1Q15: Operating-Basis Expenses1 • $137M in the seasonal deferred incentive compensation expense ($M) for retirement-eligible employees and p
Slide 12: Continue to maintain high-quality balance sheet
Continue to maintain high-quality balance sheet… 1Q151 Balance Sheet Highlights Investment • Size: $112B portfolio2 • Credit profile: ~91% rated AAA/AA • Fixed-rate/floating-rate mix: 55%/45% • Duration: 1.9 years • Unrealized after-tax mark-to-market (MTM) gain: $699M • Purchases: $7.2 billion with
Slide 13: ...and remain well-capitalized
…and remain well-capitalized 1Q15 Quarter-End Capital1 Positions 4Q14 1Q15 • 1Q15 common equity tier 1 Basel III Ratios2,3: ratios decreased from 4Q14 Common equity tier 1 ratio (advanced approaches) 12.5% 12.1% primarily due to the impact of Common equity tier 1 ratio (standardized approach) 10.8%2
Slide 14: Returning capital to shareholders remains a priority
Returning capital to shareholders remains a priority and execution of our balance sheet strategy is ongoing • In March 2015 we received a non-objection on our Comprehensive Capital Analysis and Review (CCAR) 2015 capital plan: – Intention to increase quarterly common stock dividend to $0.34 from $0.
Slide 15: Continue to focus on 2015 goals
Continue to focus on 2015 goals to deliver shareholder value in a challenging environment • 1Q15 operating-basis results1 driven by strong fee revenue, solid expense management and a favorable tax rate • Continue to focus on key priorities: – Delivering value-added solutions to our clients – Investi
Slide 16: Q&A
16 Q&A STATE STREET.
Slide 17: Appendices
Appendices Illustrative scenarios referenced by slides 10 and 15 Slide 18-20 Footnotes to slide 13 Slide 21 Operating-Basis (Non-GAAP) results Slide 22-24 Investment portfolio Slide 25-28 Definition of metrics Slide 29 Non-GAAP measures and capital ratios Slide 30 17
Slide 18: 2015 Outlook
2015 Outlook1 Strong growth in our fee revenue, partially offset by the impact of low interest rates and a higher effective tax rate • Aiming for full-year 2015 operating-basis total fee revenue1 growth of 4%-7% compared to 2014: - Equity market assumptions for full-year 2015 based on: S&P 500 15E v
Slide 19: 2015 Outlook
2015 Outlook1 Expense management remains a priority • Expense management remains a priority; while there continues to be upward pressure on regulatory compliance costs, our focus will be on: – Controlling expenses and driving further efficiencies – Expanding our capabilities to meet increasing regul
Slide 20: Illustrative Scenarios
Illustrative Scenarios 2015 Outlook1 As illustrated below, operating-basis NIR1 likely to decline in 2015 from 2014 Static Scenario Rising Scenario Primary Drivers2 State Street $2.07B-$2.17B $2.15B-$2.25B • Short-term and long-term interest rates Operating-basis • Foreign exchange rates NIR1 • Depo
Slide 21: Footnotes to slide 13
Footnotes to slide 13 1Unless otherwise specified, all capital ratios referenced on slide 13 and elsewhere in this presentation refer to State Street Corporation, or State Street, and not State Street Bank and Trust Company, or State Street Bank. Refer to the addendum linked to this presentation for
Slide 22: Summary of Operating-Basis (Non-GAAP) Results
Summary of Operating-Basis (Non-GAAP) Results1 % change vs 1Q15 $ in millions, except per share data 1Q14 2Q14 3Q14 4Q14 1Q15 1Q14 4Q14 Revenue $ 2,559 $ 2,676 $ 2,678 $ 2,724 $ 2,677 4.6% (1.7%) Expenses 1,917 1,818 1,808 1,880 1,942 1.3 3.3 EPS 0.99 1.39 1.35 1.37 1.17 18.2 (14.6) ROE 8.8% 11.9% 1
Slide 23: Operating-Basis (Non-GAAP) Revenue
Operating-Basis (Non-GAAP) Revenue1 % change vs 1Q15 $ in millions 1Q14 2Q14 3Q14 4Q14 1Q15 1Q14 4Q14 Servicing fees $ 1,238 $ 1,288 $ 1,302 $ 1,301 $ 1,273 2.8% (2.2)% Management fees 292 300 316 299 301 3.1 0.7 Trading services 253 260 278 293 324 28.1 10.6 Securities finance revenue 85 147 99 106
Slide 24: Operating-Basis (Non-GAAP) Expenses
Operating-Basis (Non-GAAP) Expenses1 % change vs 1Q15 $ in millions 1Q14 2Q14 3Q14 4Q14 1Q15 1Q14 4Q14 Compensation and employee benefits $ 1,085 $ 974 $ 955 $ 962 $ 1,088 0.3% 13.1% Information systems and communications 244 244 242 246 247 1.2 0.4 Transaction processing services 191 193 199 201 19
Slide 25: Investment portfolio consists of government & agency, structured securities and unsecured credit
Investment portfolio consists of government & agency, structured securities and unsecured credit Balances as of March 31, 2015 Government / Agency Structured Securities Unsecured Credit Treasuries Asset-backed securities (ABS) Corporate bonds Agency debentures Mortgage-backed Municipals securities (
Slide 26: Investment portfolio has high quality assets
Investment portfolio has high quality assets Investment Portfolio Assets1 ($B) • 90.7% rated AAA/AA • Assets selected using rigorous credit process • Unrealized after-tax mark-to-market (MTM) gain of • Diversified by asset class and geography $699 million 2 $ in U.S. Treasuries Unrealized After-tax
Slide 27: Investment portfolio has high quality assets across asset classes
Investment portfolio has high quality assets across asset classes Holdings by Asset Class as of March 31, 2015 Ratings Unrealized Book Book After-tax MTM Value Value Gain/(Loss) Fixed Rate/ UST/AGY3 AAA AA A BBB <BBB NR4 ($)1 (% Total) ($M)2 Floating Rate Government & agency securities 82% 10% 4% 4%
Slide 28: Investment portfolio has high quality assets among Non-U.S. investments
Investment portfolio has high quality assets among Non-U.S. investments Non-U.S. Investment as of March 31, 2015 AAA, 81.7% Book Book Value ($B) Value Average Gov't/ ABS ABS Corporate Covered AA, 7.2% ($B) Rating Agency (1) FRMBS All Other Bonds Bonds Other United Kingdom $ 8.2 AAA - 5.3 2.1 0.3 0.5
Slide 29: Definition of Metrics
Definition of Metrics Earnings per Net income available to common shareholders divided by average common share (EPS) shares outstanding Return on equity (Net income less dividends on preferred stock) divided by average common equity (ROE) Pre-tax Income before income tax expense divided by total rev
Slide 30: Non-GAAP measures and capital ratios
Non-GAAP measures and capital ratios Refer to the addendum linked to this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financial information. To access the addendum go to www.statestreet.com/stockholder and click on “Filings & Report