State Street Corporation · NYSE:STT
State Street — Q4 2013 Earnings Presentation
26 slides from State Street's earnings presentation, Jan 24, 2014
Slide 1: Fourth-Quarter and Full-Year 2013 Financial Highlights
LIMITED ACCESS State Street Corporation Fourth-Quarter and Full-Year 2013 Financial Highlights January 24, 2014 Exhibit 99.3
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: Fourth-Quarter 2013 Financial Summary
3 • GAAP-basis earnings per share, or EPS, of $1.22 increased from $1.17 in Q3 ’13 and from $1.00 in Q4 ’12 – Q4 ’13 includes a $71 million ($0.16 per share) out-of-period income tax benefit associated with the completion of a multi-year project related to our deferred tax accounts – Q4 ’13 includes
Slide 4: Summary of Full-Year 2013 GAAP-Basis Financial Results
4 Summary of Full-Year 2013 GAAP-Basis Financial Results (1) (1) Amount reflected a credit of $277 million, composed of a benefit of $362 million related to claims associated with the 2008 Lehman Brothers bankruptcy, partly offset by provisions for litigation exposure and other costs of $85 million,
Slide 5: Summary of Fourth-Quarter 2013 GAAP-Basis Financial Results
5 Summary of Fourth-Quarter 2013 GAAP-Basis Financial Results $ in millions, except per share data Q4 '13 Q3 '13 Q4 '12 vs Q3 '13 vs Q4 '12 Revenue 2,464$ 2,425$ 2,449$ 1.6% 0.6% Expenses 1,846 1,722 1,864 7.2 (1.0) EPS 1.22 1.17 1.00 4.3 22.0 ROE 10.9% 10.8% 9.3% Pre-tax operating margin 24.8 29.0
Slide 6: GAAP-Basis Revenue
6 GAAP-Basis Revenue $ in millions Q4 '13 Q3 '13 Q4 '12 Servicing fees 1,232$ 1.7% 7.1% Management fees 290 5.1 11.5 Trading services revenue 228 (10.9) (6.2) Securities finance revenue 76 2.7 2.7 Processing fees and other revenue 53 (19.7) (32.9) Net interest revenue 585 7.1 (5.9) Gains (losses) re
Slide 7: GAAP-Basis Expenses
7 GAAP-Basis Expenses $ in millions Q4 '13 Q3 '13 Q4 '12 Compensation and employee benefits 945$ 4.7% 3.3% Information systems and communications 228 (3.0) (2.6) Transaction processing services 182 (1.6) 1.7 Occupancy 124 9.7 2.5 Acquisition and restructuring costs 30 - (78.4) Other 337 31.6 22.1 To
Slide 8: Fourth-Quarter and Full-Year 2013 Financial Highlights
8 Fourth-Quarter and Full-Year 2013 Financial Highlights(1) • Key operating-basis (non-GAAP)(1) financial metrics – EPS of $1.15 for Q4 ’13, decreased 3.4% from Q3 ’13 and increased 3.6% from Q4 ’12 – EPS of $4.54 for the year ended December 31, 2013, a 14.9% increase compared to full-year 2012 – To
Slide 9: Fourth-Quarter and Full-Year 2013 Financial Highlights (Continued)
9 Fourth-Quarter and Full-Year 2013 Financial Highlights(1) (Continued) • Operating-basis (non-GAAP)(1) net interest revenue (NIR) and net interest margin (NIM) – Operating-basis NIR(1) and NIM(1) were pressured by the low interest-rate environment – Q4 ’13 NIR increased 7.8% to $596 million from Q3
Slide 10: Summary of Full-Year 2013 Operating-Basis (Non-GAAP) Financial Results
10 Summary of Full-Year 2013 Operating-Basis (Non-GAAP) Financial Results(1) (1) Results presented on an operating basis, a non-GAAP presentation. Refer to the addendum linked to this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis fina
Slide 11: Summary of Fourth-Quarter 2013 Operating-Basis (Non-GAAP) Financial Results
11 Summary of Fourth-Quarter 2013 Operating-Basis (Non-GAAP) Financial Results(1) (1) Results presented on an operating basis, a non-GAAP presentation. Refer to the addendum linked to this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis
Slide 12: Operating-Basis (Non-GAAP) Revenue
12 Operating-Basis (Non-GAAP) Revenue(1) (1) Results presented on an operating basis, a non-GAAP presentation, where applicable. 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.
Slide 13: Operating-Basis (Non-GAAP) Expenses
13 Operating-Basis (Non-GAAP) Expenses(1) Key Drivers • Compensation and employee benefits expenses increased in Q4 ’13 compared to Q3 ’13 as a result of benefit plan changes in Q3 ’13, as well as increased costs to support new business. Compared to Q4 ‘12, the increase in compensation and employee
Slide 14: Balance Sheet Highlights Fourth-Quarter 2013
14 Balance Sheet Highlights Fourth-Quarter 2013(1) (2) Investment Portfolio • Size: $117 billion, unchanged from end of Q3 ’13 • Credit profile: approximately 89% AAA / AA • Fixed-rate/floating-rate mix: 44% / 56% • Duration: 1.9 years • Unrealized after-tax mark-to-market (MTM) loss: $213 million •
Slide 15: Capital
15 Capital Footnotes (1), (2) and (3) provided on page 17. Fourth-Quarter 2013 Highlights • Maintained a strong capital position • In Q4 ’13, purchased approximately 8.0 million common shares at an average price of $69.98 per share and a total cost of approximately $560 million • As of December 31,
Slide 16: Outlook for 2014
16 Outlook for 2014(1) Expectations: • Full-year 2014 revenue growth of 3-5% compared to 2013, under the following assumptions: – Strong execution of our top priorities – Modest increases in market interest rates by later in 2014 – Equity markets to remain close to year-end 2013 levels for full-year
Slide 17: Footnotes
17 (1) Unless otherwise specified, all capital ratios referenced above and elsewhere in this presentation refer to State Street and not State Street Bank and Trust Company, or State Street Bank. Refer to the addendum linked to this presentation for a further description of these ratios, and for reco
Slide 18: Appendix
18 APPENDIX A. Investment Portfolio B. Non-GAAP Measures and Capital Ratios Pages 19-25 26
Slide 19: A. Investment Portfolio
B STATE STREET. A. Investment Portfolio
Slide 20: Investment Portfolio as of December 31, 2013
20 Portfolio amounts are expressed at book value; book value includes the amortized cost of transferred securities at the time they were transferred. OECD=Organization for Economic Cooperation and Development FFELP=Federal Family Education Loan Program Government / Agency Structured Securities Unsec
Slide 21: Investment Portfolio credit quality and unrealized MTM
21 • Assets selected using rigorous credit process • Diversified by asset class and geography • 89% rated AAA / AA • Constructed to perform well through periods of economic weakness • Unrealized after-tax available for sale (AFS) gain, and held to maturity (HTM) mark-to-market (MTM) loss net to = $(
Slide 22: Investment Portfolio by ratings and asset type
22 Ratings(1) Book Value ($B) Book Value (% Total) Unrealized After-tax MTM Gain / (Loss) ($M)(2) Investment UST / AGY AAA AA A BBB <BBB Not Rated Fixed Rate / Floating Rate Government/Agency securities 60% 22% 18% — — — — $9.5 8.1% $(257) 92% / 8% Asset-backed securities — 69% 23% 4% 1% 3% — 55.0 4
Slide 23: Asset-Backed Securities Holdings
23 Ratings(1) Book Value ($B) Book Value (% Total) Unrealized After-tax MTM Gain / (Loss) ($M) Investment UST / AGY AAA AA A BBB <BBB Not Rated Student Loans — 30% 65% 4% — 1% — $16.3 29.6% $(108) Credit Cards — 98% 2% — — — — 10.8 19.6 (5) Auto/Equipment — 99% — 1% — — — 5.5 10.0 7 Non-US RMBS — 83
Slide 24: Mortgage-backed Securities Holdings as of December 31, 2013
24 Ratings(1) Book Value ($B) Book Value (% Total) Unrealized After-tax MTM Gain / (Loss) ($M) Investment UST / AGY AAA AA A BBB <BBB Not Rated Agency MBS 100% — — — — — — $23.7 74.1% $(103) Non-Agency MBS — 39% 7% 14% 13% 27% 0% 2.2 6.9 1 CMBS 2% 83% 7% 7% 1% — — 6.1 19.0 (2) TOTAL MBS 74% 19% 2% 2
Slide 25: Non-U.S. Investment Summary as of December 31, 2013
25 Non-U.S. Investments: Ratings Non-U.S. Investments: Asset Class (1) Sovereign debt is reflected in the government agency column. (2) Country of collateral used except for corporates, where country of issuer is used. Excludes equity securities of approximately $8.5 million. (1) Investment Portfoli
Slide 26: B. Non-GAAP Measures and Capital Ratios
26 B. 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 &