State Street Corporation · NYSE:STT
State Street — Morgan Stanley Financials Conference 2013
31 slides from State Street's conference presentation, Jun 11, 2013
Slide 1: Positioned for Growth
Joseph L. Hooley Chairman, President and Chief Executive Officer Morgan Stanley Financials Conference June 11, 2013 Positioned for Growth
Slide 2: Forward-Looking Statements
LIMITED ACCESS Forward-Looking Statements 2 This presentation contains forward-looking statements as defined by United States securities laws, including statements relating to our goals and expectations regarding our business, financial and capital condition (including without limitation, our capita
Slide 3: Agenda
LIMITED ACCESS Positioned for Growth Agenda 3 Strong Foundation Trends and Business Strategy Financial Performance Summary
Slide 4: Our Strong Foundation Drives Value
LIMITED ACCESS Our Strong Foundation Drives Value Strong Global Footprint Long-Term Shareholder Value Among Highest Capital Ratios in Industry Focused Strategy Fueled by Macro Trends Extensive Global Footprint No. 1 or No. 2 Position in High-Growth Markets 4
Slide 5: Macro Trends Fuel Our Confidence for Continued Long-Term Growth
LIMITED ACCESS Macro Trends Fuel Our Confidence for Continued Long-Term Growth 5 Trend Driven by Globalization • Ongoing globalization of investment and distribution channels • 40% of the growth in financial assets expected to come from emerging markets over the next decade1 Retirement Savings • Evo
Slide 6: We're Pursuing Key Strategies for Success
LIMITED ACCESS We’re Pursuing Key Strategies for Success 6 PrioritiesStrategy • Extending geographic reach • Focusing on high-growth vertical markets – Expanded presence in alternative investment servicing • Broadening our solutions – Continuing to build SSgA with increased ETF and solutions offerin
Slide 7: Broad Set of Global Servicing Solutions
LIMITED ACCESS Broad Set of Global Servicing Solutions Uniform Global Platform Leader in Middle Office Solutions-Based Asset Management Leader in Technology Transformation Our Extensive Global Footprint and Solutions Set Us Apart in Meeting the Needs of Institutional Investors Data as of December 31
Slide 8: We Generate Strong Organic Growth as Our Clients Grow and Diversify
LIMITED ACCESS We Generate Strong Organic Growth as Our Clients Grow and Diversify 8 AUC/A 0 5 10 15 20 Top 1000 Clients Top 100 Clients Top 25 Clients 9 14 17 Average Number of Products Used by State Street Clients2 2002 2007 2012 Asia-Pacific Americas $4.7T $13.1T $17.2T EMEA Clients Within State
Slide 9: Our Alternative Investment Solutions Business Has Grown at More Than Twice the Rate of the Market
LIMITED ACCESS Our Alternative Investment Solutions Business Has Grown at More Than Twice the Rate of the Market1 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 2005 2006 2007 2008 2009 2010 2011 2012 $4.7T Alternative Investments Market $4.4T $5.2T $5.7T $6.5T $6.7T $0 $200 $400 $600 $8
Slide 10: Substantial Market Opportunity Exists with a Large Percentage of the Business Still Available
LIMITED ACCESS Substantial Market Opportunity Exists with a Large Percentage of the Business Still Available Alternatives Industry Trends: Moving Toward Outsourcing 10 Private EquityHedge Fund Real Estate Source: HF Market – State Street Estimate; PE Market - Preqin, October 2012, Custody Risk Surve
Slide 11: We Lead the Industry in Alternative Asset Servicing Globally
LIMITED ACCESS $1,045B2 $670B $563B $467B $411B $355B $246B $165B $0 $200 $400 $600 $800 $1,000 $1,200 STT CITCO BK JPM C SS&C GlobeOp NTRS HSBC We Lead the Industry in Alternative Asset Servicing Globally 1 HFM Week AUA Survey Assets as of Nov 2012 (hedge funds) and Custody Risk Alternative Fund Ad
Slide 12: State Street Global Advisors is Well Positioned for Growth
LIMITED ACCESS DRIVE NEW REVENUE State Street Global Advisors is Well Positioned for Growth $2.2T AUM1 1 As of March 31, 2013. 2 Operating leverage is defined as the rate of growth of total investment management revenue less the rate of growth of total investment management expenses. Broad Capabilit
Slide 13: We Are a Leading Sponsor of Exchange-Traded Funds
LIMITED ACCESS DRIVE NEW REVENUE 1. Source: Deutsche Bank Markets Research, January 11, 2013. 2. Source: McKinsey & Company, The Second Act Begins for ETFs, August 2011. We Are a Leading Sponsor of Exchange-Traded Funds Global Market Size ETFs / Other Exchange-Traded Products1 $0.41T $0.59T $0.80T $
Slide 14: Business Operations and IT Transformation Program
LIMITED ACCESS Business Operations and IT Transformation Program Foundation in Place to Reap Benefits 14 Process Automation and Standardization Workforce Optimization Centers of Excellence Leveraging Low Cost Locations Optimization of Cloud Technology Beyond Transformation: The Digital Enterprise 20
Slide 15: Expected Savings are on Track
LIMITED ACCESS … And Expected Savings are on Track1 15 Total Estimated Pre-Tax Expense Savings $ in millions 2011 2012 2013E 2014E 2015E Business Operations Transformation $158 $280 $400 $440 $448 Information Technology Transformation 6 36 109 148 157 Net Benefits Before Non-Recurring Expenses 164 3
Slide 16: We Have a High-Quality Balance Sheet Profile
LIMITED ACCESS OPTIMIZE CAPITAL We Have a High-Quality Balance Sheet 16 Profile (As of and for the quarter ended March 31, 2013) Average Total Assets • ~$208B Average Investment Portfolio • ~$120B Investment Portfolio Risk Position • Portfolio duration: 1.7 years • Credit profile: 88% AAA/AA-rated •
Slide 17: We Have a Strong Capital Position
LIMITED ACCESS We Have a Strong Capital Position Results of the Federal Reserve’s 2013 CCAR Stress Test* 13.2% 9.7% 8.6% 8.2% 7.8% 7.5% 7.0% 6.9% 6.8% 6.7% 6.6% 6.4% 6.0% 5.9% 5.6% 5.6% 5.3% 1.5% 7.0% 0% 2% 4% 6% 8% 10% 12% 14% B N Y M e l l o n S t a t e S t r e e t P N C F i n a n c i a l C i t i
Slide 18: Returning Capital to Our Shareholders is a Priority
LIMITED ACCESS Returning Capital to Our Shareholders is a Priority 18 Dividend Payout • Increased 2013 quarterly common stock dividend by $0.02 to $0.26 per share Common Stock Purchase Program • In March 2013, our Board approved a common stock purchase program of up to $2.1B through March 31, 2014 O
Slide 19: Financial Performance
LIMITED ACCESS 19 Financial Performance 19
Slide 20: We're Executing Well Amid a Challenging Environment
LIMITED ACCESS We’re Executing Well Amid a Challenging Environment … How we’ve addressed … • Growing our core business and continuing to invest in high-growth markets • Implementing a multi-year Business Operations and IT Transformation program to reduce costs and enable product and service innovati
Slide 21: 2012 Operating-Basis (Non-GAAP) Financial Results
LIMITED ACCESS 2012 Operating-Basis (Non-GAAP) Financial Results1 21 $ in millions, except per share data 2012 2011 % Change Revenue $9,730 $9,564 1.74% Expenses 6,905 6,789 1.71% Earnings per share (EPS) $3.95 $3.73 5.9% Return on equity (ROE) 9.7% 9.9% (20) bps Operating leverage2 3 bps Pre-tax op
Slide 22: In 2012 We Performed Well
LIMITED ACCESS In 2012 We Performed Well1 … 1 Results presented on an operating basis, a non-GAAP presentation. See Appendix for a description of our non-GAAP financial measures and for reconciliations of our operating- basis financial information. 9.7 6 8 10 STT (%) 1.46 0.5 1 1.5 STT (%) Net Inter
Slide 23: and Outperformed Our Primary Peers
LIMITED ACCESS … and Outperformed Our Primary Peers1 Well Positioned to Maintain Our Lead 9.7 8.8 9.3 6 8 10 STT BK NTRS (%) 1.46 1.21 1.22 0.5 1 1.5 STT BK NTRS (%) Net Interest Margin Return on Equity 29.1 22.9 26.2 20 25 30 STT BK NTRS (%) Pre-Tax Margin 1 As described in the Appendix: (i) data f
Slide 24: Q1 2013 Operating-Basis (Non-GAAP) Financial Results
LIMITED ACCESS Q1 2013 Operating-Basis (Non-GAAP) Financial Results1 24 $ in millions, except per share data Q1 2013 Q1 2012 % Change Revenue $2,470 $2,421 2.0% Expenses 1,8122 1,799 0.7% Earnings per share (EPS) $0.96 $0.84 14.3% Return on equity (ROE) 8.9% 8.6% 30 bps Operating Leverage3 130 bps P
Slide 25: Our Total Return Has Outperformed Primary Peers and the Broader Financial Index
LIMITED ACCESS Our Total Return Has Outperformed Primary Peers and the Broader Financial Index … 25 1/12 4/12 7/12 10/12 1/13 4/13 -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 1/1/2012 ‐ 5/31/2013 Total Return STT 68.5% S & P Fin. 56.5% NTRS 51.3% BK 56.1% State Street Corporation S & P Financial Index N
Slide 26: Summary
LIMITED ACCESS Well Positioned for the Long Term Managing Through the Short Term Delivering Value Today and for the Future Summary 26
Slide 27: Appendix
Appendix 27 The foregoing presentation includes financial information presented in conformity with U.S. Generally Accepted Accounting Principles, or GAAP, as well as on a non-GAAP, or “operating basis.” Management measures and compares certain financial information on an operating basis, as it belie
Slide 28: 2012 YTD vs. 2011 YTD Reconciliation
2012 YTD vs. (Dollars in millions, except per share amounts) 2011 YTD Total Revenue: Total revenue, GAAP basis $ 9,649 $ 9,594 0.57 % Tax-equivalent adjustment associated with tax-exempt investment securities 124 128 Tax-equivalent adjustment associated with tax-advantaged investments 126 62 Loss fr
Slide 29: 2012 YTD vs. 2011 YTD Diluted Earnings per Share
2012 YTD vs. 2011 YTD Diluted Earnings per Common Share: Diluted earnings per common share, GAAP basis $ 4.20 $ 3.79 10.8 % Loss from sale of Greek investment securities .06 - Provisions for litigation exposure and other costs .12 - Special one-time additional charitable contribution .04 - Acquisiti
Slide 30: Q1 2013 vs. Q1 2012 Reconciliation
Q1 2013 vs. (Dollars in millions, except per share amounts) Q1 2012 Total Revenue: Total revenue, GAAP basis $ 2,435 $ 2,421 0.6 % Tax-equivalent adjustment associated with tax-exempt investment securities 32 31 Tax-equivalent adjustment associated with tax-advantaged investments 34 18 Discount accr
Slide 31: Peer Comparison: Operating-Basis Pre-tax Operating Margin
31 Peer Comparison: Operating-Basis (Non-GAAP) Pre-tax Operating Margin Page 23 of this presentation contains a comparison of pre-tax operating margin for State Street Corporation (STT), The Bank of New York Mellon Corporation (BK) and Northern Trust Corporation (NTRS). The data in the comparison on
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