State Street Corporation · NYSE:STT
State Street — Investor Day (February 2016)
78 slides from State Street's investor day presentation, Feb 24, 2016
Slide 1: Transforming State Street to Extend Our Leadership Position
Transforming State Street to Extend Our Leadership Position Investor Day Jay L. Hooley, Chairman & CEO February 24, 2016
Slide 2: Forward-looking statements
2 Forward-looking statements 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, results of operations, investment portfolio performance
Slide 3: Agenda
3 Agenda 11:45 AM – 12:30 PM Registration & Networking and SSGX Demonstrations 12:30 PM – 12:45 PM Introduction on the Day – Transforming State Street to Extend Our Leadership Position 12:45 PM – 1:55 PM Session #1: State Street Beacon: Capturing the Digital Opportunity 1:55 PM – 3:00 PM Session #2:
Slide 4: Managing the complex administration needs of institutional clients
4 Managing the complex administration needs of institutional clients All data as of or for the year-ended December 31, 2015, as applicable. 1 This AUM includes the assets of the SPDR® Gold ETF (approximately $22B as of December 31, 2015), for which State Street Global Markets, LLC, an affiliate of S
Slide 5: Leading positions in high-growth markets around the world
5 All data as of or for the year-end December 31, 2015, as applicable. AUCA: assets under custody and administration; AUM: assets under management. 1 Please see Appendix for footnotes 2-10. …with leading positions in high-growth markets around the world • #1 U.S. Mutual Fund Servicing2 • #1 ETF Glob
Slide 6: Clients in a period of significant change and uncertainty
6 Our principal client segments, Asset Owners and Asset Managers, are in a period of significant change and uncertainty… • Weak global growth and volatile markets: – Declining emerging markets and stagnant developed markets – Investor sentiment favoring risk aversion – Heightened market volatility –
Slide 7: Macro trends continue to support long-term growth prospects
7 …however, macro trends continue to support long-term growth prospects Asset Managers Asset Owners Official Institutions Insurance Companies Intermediaries Global Growth and Shifting Nature of Retirement Savings Industry Convergence Regulatory Change Reshaping Markets and Landscape Secular Challeng
Slide 8: Transforming State Street to compete in the new environment
8 We’re transforming State Street to compete in the new environment while continuing to deliver value in the short term • We have a bold vision and plan to become a digital leader in financial services: – Digitize our operating environment to facilitate new products and create efficiency – Transform
Slide 9: Presenters and sessions
9 Presenters: Mike Bell Delivering Shareholder Value in a Challenging Environment Jay Hooley Transforming State Street to Extend Our Leadership Position Dave Gutschenritter Session # 3 Q&A Panelist Up next are three sessions to expand on how we are positioning for the future Presenters: Mike Rogers
Slide 10: Session #1: State Street Beacon: Capturing the Digital Opportunity
Session # 1: State Street Beacon: Capturing the Digital Opportunity Investor Day Mike Rogers, President & Chief Operating Officer Antoine Shagoury, EVP, Global Chief Information Officer Lou Maiuri, EVP, Head of State Street Global Exchange February 24, 2016
Slide 11: Capturing the digital opportunity
11 Capturing the digital opportunity Best-in-class service and solutions End-to-end delivery Agile methodologies and teams Client-centric design and innovation One view of the client Next-generation technology What it means for us
Slide 12: State Street Beacon: Imagine our digital future
12 State Street Beacon: Imagine our digital future Building on our IT and Ops Transformation success Digital integration Data arrives electronically and is integrated with our systems Clients Other institutions Markets Rapid processing Our systems process data real time as it arrives When the trade
Slide 13: Well positioned to build on our success
13 Well positioned to build on our success Examples of key initiatives Progress to Date State Street Beacon: Path Forward Digitization of Services and Solutions Data management and warehousing platform Digitizing data to deliver on-demand Automated core processes End-to-end integration of automated
Slide 14: State Street Beacon Vision: client-centric digital services company
14 Client Integrated view across service offerings Near-real time delivery Scalability to grow with clients Multi-asset class data and services on demand Technology configured based on client needs Thought partnership and insight Product innovation State Street Beacon Vision: To be a client-centric
Slide 15: Value to Investors and Clients
15 Value to Investors and Clients Initiatives designed to drive ongoing value to key stakeholders Value to Investors Value to Clients Digitization of Services and Solutions Reduced cost, less labor needed to: • Process work: from trade capture to reporting • Maintain platforms • Support inquiries: i
Slide 16: Non-GAAP and outlook notes
16 1 Operating-basis financial outlook is a non-GAAP presentation. Refer to the Appendix linked to this presentation for explanations of our non-GAAP financial measures. 2 Estimated pre-tax expense savings improvement relate only to State Street Beacon and the targeted staff reductions announced as
Slide 17: State Street Beacon: Capturing the Digital Opportunity
State Street Beacon: Capturing the Digital Opportunity Antoine Shagoury, EVP, Global Chief Information Officer February 24, 2016
Slide 18: Creation of a fully digitized platform
18 Creation of a fully digitized platform and integration with client technology and processes Client-Centric Digitized Platform Client Value / Client Experience Future End State Focus of State Street Beacon: Transformational Change Optimized COE- based Operating Model Current TDE Program Fully Digi
Slide 19: Our global R&D network
19 Our global R&D network Thought leadership to drive continued innovation Research Partnerships Emerging Technology Center • Structured exploration of emerging technologies • Future integration into business units • Positioning us at the forefront of the rapidly changing technology landscape • Init
Slide 20: On digital journey to evolve our technology capabilities
20 Advanced Analytics and Product Development: • Prescriptive / predictive analytics • Intuitive hyper-customizable functionality • Dynamic client service segmentation and contextual value targeting opportunities On digital journey to evolve our technology capabilities Hybrid Cloud: • Platform and I
Slide 21: State Street Beacon: Capturing the Digital Opportunity
State Street Beacon: Capturing the Digital Opportunity Lou Maiuri, EVP, Head of State Street Global Exchange February 24, 2016
Slide 22: Global Exchange client challenges and value proposition
22 Client Challenges • Asset managers and asset owners are seeking an information advantage while needing to lower the cost of their operations • Managing risk has become an increasingly important topic in today’s complex and fast moving markets • The search for better performance at the right level
Slide 23: Managing Enterprise Data
23 Managing Enterprise Data A key cost driver facing clients today is underlying data challenge Client Challenges Asset managers and asset owners are seeking an information advantage while needing to lower the cost of their operations GX Value Proposition We provide hosted data and software solution
Slide 24: Managing Risk
24 Managing Risk Client Challenges In today’s complex and fast moving markets managing risk continues to be critical GX Value Proposition We provide information, insights and analytic solutions to address transparency needs across the investment lifecycle GX Solutions Investment Analytics: • Liquidi
Slide 25: Enhancing Performance: research and indicators
25 Our research and indicators help create signals to react to a changing investment environment Enhancing Performance Client Challenges The search for better performance at the right level of risk is paramount in today’s challenging markets GX Value Proposition We help clients make better informed
Slide 26: Raising Assets
26 Raising Assets Client Challenges Attracting assets in an increasing competitive global marketplace requires the ability to differentiate capabilities GX Value Proposition We provide investable strategies and curated research to help asset owners and managers grow their business GX Solutions Advis
Slide 27: Creating an Information Advantage
27 It’s about creating an Information Advantage Global Exchange facilitates a client-centric digital services company User-centered design Integrated view across State Street services Multi-asset class data and services on demand Personalized and mobile delivery based on client needs Impro
Slide 28: Session #1 Questions & Answers
Session # 1: State Street Beacon: Capturing the Digital Opportunity Investor Day Mike Rogers, President & Chief Operating Officer Antoine Shagoury, EVP, Global Chief Information Officer Lou Maiuri, EVP, Head of State Street Global Exchange February 24, 2016 Questions & Answers
Slide 29: Session #2: Driving Revenue Throughout the Cycle
Session # 2: Driving Revenue Throughout the Cycle Investor Day Ronald P. O’Hanley, President & CEO, State Street Global Advisors Jeff Conway, CEO of State Street Europe, the Middle East and Africa (EMEA) Gunjan Kedia, EVP, Head of Investment Servicing, Americas February 24, 2016
Slide 30: Macro trends continue to support long-term growth prospects
30 Macro trends continue to support long-term growth prospects Asset Managers Asset Owners Official Institutions Insurance Companies Intermediaries Global Growth and Shifting Nature of Retirement Savings Industry Convergence Regulatory Change Reshaping Markets and Landscape Secular Challenges to Ass
Slide 31: Trends affecting asset managers and asset owners
31 • Asset Owners demanding asset management portfolio tools, infrastructure, and technology and bringing investment management in-house • Alternatives and traditional crossover and consolidation • Lower-for-longer interest rates driving demand for fee-productive solutions • DB to DC and Retail shif
Slide 32: State Street Global Advisors Overview
32 State Street Global Advisors Overview AUM $2.24 trillion Revenues $1.2 B NIBT $236 M Employees 2,348 • #3 global asset manager2 • 9 investment centers • 11 product domiciles • ~70 countries with clients By the Numbers1 Global Footprint Rich Mix of Clients1 (% of AUM) Broad Range of Vehicles1 (% o
Slide 33: Our leadership positions
33 $66 $44 $32 $25 $19 SSGA VAN WMC NTRS BK $497 $376 $205 $177 $176 BLK SSGA BK NTRS PRU $166 $153 $123 $36 $31 SSGA Pioneer BLK NTRS JPM $126 $113 $93 $88 $72 BK SSGA BLK LM NTRS 1 Pensions and Investments Research Center Data as of December 31, 2014. 2 Pensions and Investments Research Center Dat
Slide 34: ETFs: Revenue and product innovation focus
34 AUM1 1 BlackRock 2 Vanguard 3 SSGA2 ETFs: Revenue and product innovation focus 2015 Product Innovation52015 SPY4 2015 Revenue3 1 BlackRock 2 SSGA 3 Vanguard 1. Morningstar as of December 2015. 2. Includes SPDR Gold Fund, for which State Street is not the investment manager, but acts as distributi
Slide 35: SSGA positioned across the ETF ecosystem
35 SSGA uniquely positioned to participate across ETF ecosystem SPDR Building blocks Asset allocation New institutional use cases ETF models for intermediaries ETFs in DC plans Global growth Policy tools for Official Institutions
Slide 36: SSGA's growth priorities
36 SSGA’s growth priorities Extend core investment capabilities to deepen and broaden penetration of client base while capitalizing on industry trends Global ETFs Talent Investment Capabilities Operations / Information Technology Risk Excellence Global Defined Contribution Asset Allocation / Solutio
Slide 37: Drivers impacting Asset Managers and Asset Owners
37 Drivers impacting Asset Managers and Asset Owners underscore importance of finding new ways to create value Global Growth and Shifting Nature of Retirement Savings Industry Convergence Regulatory Change Reshaping Markets and Landscape Secular Challenges to Asset Managers Data Revolution Driving I
Slide 38: Client Case: Outsourced CIO solution for DB plan
38 Client Case: Cross-enterprise Outsourced Chief Investment Officer solution for DB plan • Large capital-intensive US utility company struggled with multiple DB plans acquired through M&A, with limited staff and a costly, decentralized structure • Sought strategic partner to streamline plans and de
Slide 39: Client Case: ETF turnkey solutions
39 $6 $73 $0 $10 $20 $30 $40 $50 $60 $70 $80 2008 2015 Client Case: ETF turnkey solutions for cost efficiencies and institutional-strength components 1 2 3 4 5 ETF Managed Portfolio Asset Growth Source: Morningstar • Growing interest from advisors for packaged ETF solutions for cost effectiveness an
Slide 40: Driving Revenue Throughout the Cycle: EMEA
Driving Revenue Throughout the Cycle Jeff Conway, CEO of State Street Europe, the Middle East and Africa (EMEA) February 24, 2016
Slide 41: EMEA is a key contributor to the global franchise
41 All data as of or for the year-end December 31, 2015, as applicable. AUCA: assets under custody and administration (based on location in which the assets are serviced). AUM: assets under management (based on client location or fund-management location). 1 Asset figures sourced from Bloomberg as o
Slide 42: A significant and growing investment market across Europe
42 1 Sources: Cerulli; State Street projections where no forecasts available by country or investment pool type (Mutual Funds; Retirement; Insurance). 2 Ireland and Luxembourg AUA data. Ireland data is as of June 30 2014, and Luxembourg data is as of December 31 2014; domiciled funds only. 3 Denmark
Slide 43: Touch-points with client segments present growth opportunity
43 1 Sources: Investment & Pensions Europe (2015); Pensions and Investments Research Center; Towers Watson; Investment Association (formerly Investment Management Association); Monterey Insight (Ireland data is as of June 30 2015, and Luxembourg data is as of December 31 2014; domiciled funds only).
Slide 44: EMEA's growth priorities
44 EMEA’s growth priorities Deepen and expand our capabilities to capitalize on market and industry trends Shift to Defined Contribution and Beyond Multi-Domicile, Multi-Product Capabilities Talent and Diversity Size and Scale in Europe Footprint Optimization ETFs and Alternatives Product Innovation
Slide 45: Drivers impacting Asset Managers and Asset Owners
45 Drivers impacting Asset Managers and Asset Owners underscore importance of finding new ways to create value Global Growth and Shifting Nature of Retirement Savings Industry Convergence Regulatory Change Reshaping Markets and Landscape Secular Challenges to Asset Managers Data Revolution Driving I
Slide 46: Client Case: Multi-domicile growth for asset manager
46 Client Case: Accelerating multi-domicile growth for a leading pure-play asset manager via a ‘follow the sun’ investor-services model 2 1 3 4 5 • Asset Manager seeking to expand its alternative strategies and multi-asset class capabilities, and prepare ground for expansion outside Europe • Looking
Slide 47: Client Case: Bespoke outsource solution for pension strategy
47 Client Case: Providing bespoke outsource solution to support pension strategy of a global asset manager 7 55 2010 2015 CAGR 51% No. of funds serviced 36 63 1 2 3 4 5 Net Asset Growth ($B) • Global client looking to build scalable model for multi- and single-client funds in Europe, with a focus on
Slide 48: Driving Revenue Throughout the Cycle: Americas
Driving Revenue Throughout the Cycle Gunjan Kedia, EVP, Head of Investment Servicing, Americas February 24, 2016
Slide 49: SSGS is an exceptional franchise
49 1 September 10, 2015 NASDAQ. 2 eVestment, December 31, 2014. 3 ETFGI, July 2015. 4 Scrip Issue Global Report, September, 2015. 5 Markit data, Q2 2015 quarterly AOL Balance. SSGS is an exceptional franchise • #1 U.S. Mutual Fund Accounting1 • #1 Hedge Fund Servicing2 • #1 ETF Asset Servicing3 • #1
Slide 50: Our leadership positions
50 Assets Serviced by Global Custodian (AUCA $T) US Mutual Funds (Daily Published NAVs) Global Middle Office Outsourcing (Outsourced Assets $T) Global Hedge Fund Administrators (AUA $B) Global ETF Administrators (AUA $B) Source: eVestment, December 31, 2014. SS&C recently agreed to acquire C’s Hedge
Slide 51: Touch-points with leading players
51 1 State Street internal analysis and Mutual Funds; Morningstar 12 / 2015, Insurance; www.relbanks.com / top- insurance-companies / usa, Alternative Managers; Towers Watson, Pension funds; Money Market Directory 12/2015. 2 As of June 30, 2015. Touch-points with leading players 40 38 33 30 10 12 17
Slide 52: SSGS's growth priorities
52 SSGS’s growth priorities Extend our market leadership by targeting high-growth markets and driving product innovation to address clients’ regulatory and operational challenges Growing with our Clients Service Quality Talent Depth and Expertise Operations / Information Technology Risk Excellence H
Slide 53: Drivers impacting Asset Managers and Asset Owners
53 Drivers impacting Asset Managers and Asset Owners underscore importance of finding new ways to create value Global Growth and Shifting Nature of Retirement Savings Industry Convergence Regulatory Change Reshaping Markets and Landscape Secular Challenges to Asset Managers Data Revolution Driving I
Slide 54: Client Case: Improving risk management and regulatory compliance
54 Client Case: Improving risk management capabilities and assisting with compliance of regulatory requirements 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Client AUM ($B) 1 2 3 4 5 • Leading asset manager with a global footprint • Rapidly growing asset base, particularly in off- shore pr
Slide 55: Client Case: Helping an Asset Owner optimize its investments
55 Client Case: Helping an Asset Owner optimize its investments 1 Year 3 Years 5 Years 7 Years 10 Years Client Benchmark • Large US public pension fund brought selected asset management in-house • Very innovative approach to investment management leveraging advanced technology and data analytics Con
Slide 56: Extending our leadership position leveraging macro trends
56 Extending our leadership position and delivering solutions that leverage key macro trends expected to generate long- term growth Global Growth and Shifting Nature of Retirement Savings Industry Convergence Regulatory Change Reshaping Markets and Landscape Secular Challenges to Asset Managers Data
Slide 57: Session #2 Questions & Answers
Session # 2: Driving Revenue Throughout the Cycle Investor Day Ronald P. O’Hanley, President & CEO, State Street Global Advisors Jeff Conway, CEO of State Street Europe, the Middle East and Africa (EMEA) Gunjan Kedia, EVP, Head of Investment Servicing, Americas February 24, 2016 Questions & Answers
Slide 58: Session #3: Delivering Shareholder Value in a Challenging Environment
Session # 3: Delivering Shareholder Value in a Challenging Environment Investor Day Michael W. Bell, EVP & CFO Jay L. Hooley, Chairman & CEO February 24, 2016
Slide 59: Remain focused on key priorities in 2016
59 Remain focused on key priorities in 2016 Generating fee revenue growth by providing solutions to our clients Prudently managing expenses Returning capital to shareholders
Slide 60: Delivered mixed results in 2015
60 1 Where applicable, as compared to 2014. Results presented on an operating basis, a non-GAAP presentation. Refer to Appendix included with this presentation for explanations of our non-GAAP measures and for reconciliations of our operating-basis financial information. 2 Fee operating leverage is
Slide 61: 2016 financial outlook
61 1 Includes operating-basis (non-GAAP) financial information. Operating-basis financial outlook is a non-GAAP presentation. Refer to the addendum linked to this presentation for explanations of our non-GAAP financial measures. 2 Fee operating leverage is defined as rate of growth of total fee reve
Slide 62: Focus is on managing through the challenging environment
62 1 Includes operating-basis (non-GAAP) financial information. Operating-basis financial outlook is a non-GAAP presentation. Operating-basis expense growth outlook assumes that in 2016 that there will be reasonable outcome for regulatory framework or expectations. Refer to the addendum linked to th
Slide 63: State Street Beacon expected financial benefits through 2020
63 State Street Beacon expected to deliver financial benefits to be achieved through 2020 1 Estimated pre-tax expense savings improvement relate only to State Street Beacon and the targeted staff reductions announced as part of our 3Q15 financial results, and are based on projected improvement from
Slide 64: Expect improvement in NIM over long term
64 1 Includes operating-basis (non-GAAP) financial information, where noted. Operating-basis financial targets are a non- GAAP presentation. Refer to Appendix included with this presentation for explanations of our non-GAAP measures and for reconciliation of our historical operating-basis financial
Slide 65: Maintaining our long-term financial goals
65 1 Long-term goals presented on an operating-basis, a non-GAAP presentation and do not reflect near-term expectations. Refer to Appendix included with this presentation for explanations of our non-GAAP measures. 2 Organic growth excludes revenue growth from acquisitions. 3 Operating leverage is de
Slide 66: Capital ratios
66 1 Estimated pro forma fully phased-in ratios for December 31, 2014, March 31, 2015, June 30, 2015, September 30, 2015 and December 31, 2015 presented (fully phased in as of January 1, 2019, as per Basel III phase-in requirements for capital) reflect capital calculated under the Basel III final ru
Slide 67: Capital management priorities and returning capital to shareholders
67 1 Operating-basis financial outlook is a non-GAAP presentation. Refer to the Appendix linked to this presentation for explanations of our non-GAAP financial measures. 2 All dividends are subject to review by the Federal Reserve, including review of our 2016 capital plan in the CCAR process, as we
Slide 68: We are well positioned for the future
68 We are well positioned for the future State Street Beacon: Capturing the Digital Opportunity Driving Revenue Throughout the Cycle Delivering Shareholder Value in a Challenging Environment
Slide 69: Transforming State Street to Extend Our Leadership Position
Transforming State Street to Extend Our Leadership Position Investor Day Jay L. Hooley, Chairman & CEO February 24, 2016
Slide 70: Transforming State Street to compete in the new environment
70 Transforming State Street to compete in the new environment while continuing to deliver value in the short term We have a bold vision and plan to become a digital leader in financial services We expect our core franchise to continue to deliver growth given our leading positions in attractive mark
Slide 71: Questions & Answers
Questions & Answers Session # 3: Delivering Shareholder Value in a Challenging Environment Investor Day Michael W. Bell, EVP & CFO Jay L. Hooley, Chairman & CEO David J. Gutschenritter, EVP February 24, 2016
Slide 72: Appendix: Footnotes
72 Appendix: Footnotes 2 to 10 for slide 5 2. #1 Mutual Fund Accounting, Mutual Fund Service Guide, 2015 3. 2015 Global ETF Awards 4. #3 The Pension and Investments Research Center / Towers Watson global 500 research and ranking 2014 5. #1 Global Alternative Asset Servicing Provider, Evestment Admin
Slide 73: Appendix: Non-GAAP Measures
73 Appendix: Non-GAAP Measures % Change (Dollars in millions) 2015 vs. 2014 Total Revenue1: Total revenue, GAAP basis1 $ 10,360 $ 10,274 0.8% Adjustment to processing fees and other revenue (see below ) 194 288 Adjustment to net interest revenue (see below ) 173 173 Adjustment to net interest revenu
Slide 74: Appendix: Non-GAAP measures
74 Appendix: Non-GAAP measures (Dollars in millions) 4Q15 N et Interest R evenue: Net interest revenue, GAAP basis 494$ Tax-equivalent adjustment associated with tax-exempt investment securities 42 Net interest revenue, fully taxable-equivalent basis1 536 Discount accretion associated with former co
Slide 75: Appendix: Non-GAAP Measures
75 Appendix: Non-GAAP Measures % Change (Dollars in millions) 2015 vs. 2014 D iluted Earnings per C o mmo n Share 1 : Diluted earnings per common share, GAAP basis1 $ 4.47 $ 4.53 -1.3% Severance costs .11 .13 Provisions for legal contingencies .76 .34 Expense billing matter .03 — Acquisition costs .
Slide 76: Appendix: Reconciliations of Full Phase-In Capital Ratios
76 Appendix: Reconciliations of Full Phase-In Capital Ratios As of December 31, 2015 (Dollars in millions) B asel III A dvanced A ppro aches P hase- In P ro visio ns B asel III A dvanced A ppro aches F ully P hased-In P ro - F o rma Est imate B asel III Standardized A ppro ach P hase- In P ro visio
Slide 77: Appendix: Reconciliations of Full Phase-In Capital Ratios
77 Appendix: Reconciliations of Full Phase-In Capital Ratios As of June 30, 2015 (Dollars in millions) B asel III A dvanced A ppro aches P hase- In P ro visio ns B asel III A dvanced A ppro aches F ully P hased- In P ro - F o rma Est imate B asel III Standardized A ppro ach P hase- In P ro visio ns
Slide 78: Appendix: Reconciliations of Full Phase-In Capital Ratios
78 Appendix: Reconciliations of Full Phase-In Capital Ratios As of December 31, 2014 (Dollars in millions) B asel III A dvanced A ppro aches P hase- In P ro visio ns B asel III A dvanced A ppro aches F ully P hased- In P ro - F o rma Estimate B asel III Standardized A ppro ach P hase- In P ro visio