Slide 1: Second Quarter 2018 Financial Highlights
Second Quarter 2018 Financial Highlights July 20, 2018 (NYSE: STT)
Slide 2: Preface and forward-looking statements
Preface and forward-looking statements This presentation includes certain highlights of, and also material supplemental to, State Street Corporation’s news release announcing its second quarter 2018 financial results. That news release contains a more detailed discussion of many of the matters descr
Slide 3: Highlights
Highlights All comparisons are to prior year periods • Strong 1H18 AUCA and AUM growth resulting from market appreciation, new business and client flows Growing • 1H18 new servicing business wins of ~$1.5T, including ~$105B in 2Q18 driven by Our Core continued client demand1 Franchise • Strong custo
Slide 4: Summary of 2Q18 results
Summary of 2Q18 results Quarters %∆ ($M, except EPS data, or where otherwise noted) 2Q18 1Q18 2Q17 2Q17 1Q18 Revenue: Servicing fees $1,381 $1,421 $1,339 3% (3)% Management fees A 465 472 397 17 (2) Trading services 315 304 289 9 4 Securities finance 154 141 179 (14) 9 Notable Items Processing fees
Slide 5: Generated strong earnings growth and return on equity driven by fee revenue and solid net interest income growth
Generated strong earnings growth and return on equity driven by fee revenue and solid net interest income growth GAAP unless noted otherwise Diluted EPS ROE ($) (%) +31% +2.4%pts +2.1%pts 3.51 14.7 13.7 12.6 13.0 12.8 +23% 11.3 2.69 1.88 1.53 1.66 1.62 6.9 0.89 2Q17 3Q17 4Q17 1Q18 2Q18 1H17 1H18 2Q1
Slide 6: AUCA and AUM growth driven by equity market appreciation and client momentum
AUCA and AUM growth driven by equity market appreciation and client momentum Assets Under Custody Assets Under and Administration (AUCA) Management (AUM) ($T, as of period-end) ($B, as of period-end) +9% +5% 33.1 33.3 33.9 2,782 2,729 2,723 32.1 2,606 2,673 31.0 2Q17 3Q17 4Q17 1Q18 2Q18 2Q17 3Q17 4Q
Slide 7: Fee revenue growth driven by equity market appreciation, new business and client activity
Fee revenue growth driven by equity market appreciation, new business and client activity Fee Revenue 2Q18 vs 2Q17 ($M) +6% Solid fee revenue growth of 6% +5% ex FX YoY • Servicing fees increased mainly due to higher equity 2,378 2,358 %∆ 2,235 2,242 2,230 market levels, client activity and new busi
Slide 8: Continued NII and NIM expansion driven by higher U.S. interest rates and disciplined liability pricing
Continued NII and NIM expansion driven by higher U.S. interest rates and disciplined liability pricing GAAP unless noted otherwise NII & NIMA 2Q18 vs 2Q17 (NII $M, NIM %) NII (FTE) +10% NIM (FTE) +19bps B • NII increased primarily due to higher U.S. interest rates 645 656 664 677 and disciplined lia
Slide 9: Expense growth reflects continued investments in the future while reducing legacy costs
Expense growth reflects continued investments in the future while reducing legacy costs Expenses 2Q18 vs 2Q17 ($M) +6%A +5% ex FX Active expense management calibrated to the current 2,256B C YoY revenue environment 2,131 2,159 %∆ 2,031 2,021 • Compensation and employee benefitsC decreased primarily
Slide 10: Beacon continues to deliver client benefits and operational efficiencies
Beacon continues to deliver client benefits and operational efficiencies 1H18 Beacon Savings Building on the success of Beacon: 1H18 $M 1Q18 2Q18 1H18 ~% • Continue to monetize digitization Optimization 35 39 74 49% accomplishments, reduce manual work IT Transformation 15 16 31 21% and processing, a
Slide 11: Investment portfolio and capital position highlights
Investment portfolio and capital position highlights Investment Portfolio Highlights Quarter-End Capital Positions ($B, as of June 30, 2018) (%, Fully phased-in as of period-end) Capital Ratios 3,4,5,6 12.3% 12.0% 12.1% 12.4% 11.7% $97.5B $85.6B $87.1B 11.6% 10.9% 11.3% 11.3% Non- Non- 10.8% Non- No
Slide 12: 1H18 summary
1H18 summary GAAP unless noted otherwise; All comparisons are to 1H17 Strong first half of 2018 • EPS growth of 31% and ROE of 13.7%, up 2.4%pts • Business momentum continues: – Announced solid new servicing business wins of ~$1.5T7 – Fee revenue growth of 7%A driven by market appreciation, new busi
Slide 13: Appendix
Appendix Summary of 1H18 results 14 2Q18 vs 1Q18 variances for Total fee 15 – 17 revenue, NII and Total expenses Slide endnotes 18 Forward-looking statements 19 Non-GAAP measures 20 Definitions 21 13
Slide 14: Summary of 1H18 results
Summary of 1H18 results Quarters Quarters 1Q18 v 2Q18 v 1H18 v ($M, except EPS data, or where otherwise noted) 1H18 1H17 1Q18 2Q18 1Q17 2Q17 1Q17 % ∆ 2Q17 % ∆ 1H17 % ∆ Revenue: Servicing fees $1,421 $1,381 $2,802 $1,296 $1,339 $2,635 10% 3% 6% Management fees A 472 465 937 382 397 779 23 17 20 Tradi
Slide 15: Fee revenue flat as lower equity market levels offsets higher trading activity
Fee revenue flat as lower equity market levels offsets higher trading activity Fee Revenue 2Q18 vs 1Q18 ($M) -1%A Flat ex FX Fee revenue flat in light of neutral market returns and muted client asset flows QoQ 2,378 2,358 %∆ • Servicing fees decreased primarily due to lower equity 2,235 2,242 2,230
Slide 16: Continued NII and NIM growth driven by higher U.S. interest rates and disciplined liability pricing
Continued NII and NIM growth driven by higher U.S. interest rates and disciplined liability pricing GAAP unless noted otherwise NII & NIMA 2Q18 vs 1Q18 (NII $M, NIM %) NII (FTE) +2% NIM (FTE) +6bps • NII increased primarily due to higher U.S. interest rates 645 656 664 B 677 and disciplined liabilit
Slide 17: Decline in expenses driven by lower incentive compensation offset by repositioning charge
Decline in expenses driven by lower incentive compensation offset by repositioning charge Expenses 2Q18 vs 1Q18 ($M) -4%A -3% ex FX Active expense management resulted in modestly B QoQ lower underlying expenses 2,256 2,159 C 2,131 %∆ • Compensation and employee benefitsA decreased 2,031 2,021 primar
Slide 18: Slide endnotes
Slide endnotes 1 These amounts exclude new business which has been contracted, but for which the client has not yet provided permission to publicly disclose and for which the installation date extends beyond one quarter. 2 2Q17 restructuring charges of $62M have been allocated to compensation and em
Slide 19: Forward-looking statements
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 business, financial and capital condition, results of
Slide 20: Non-GAAP measures
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 non-GAAP basis. In general, our non-GAAP financial results adjust selected GAAP-basis fi
Slide 21: Definitions
Definitions ABS Asset-backed securities Available-for-sale (AFS) Security that is purchased with the ability of selling before it reaches maturity AUCA Assets under custody and administration AUM Assets under management Bps Basis points Diluted earnings per share (EPS) Net income available to common