Slide 1: First Quarter 2017 Financial Highlights
First Quarter 2017 Financial Highlights April 26, 2017 (STT: NYSE)
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 first quarter 2017 financial results. That news release contains a more detailed discussion of many of the matters descri
Slide 3: Summary of GAAP & Operating-basis Results
Summary of GAAP & Operating-basis Results GAAP-basis % Change Operating-basis % Change $ in millions, except per share data 1Q16 4Q16 1Q17 4Q16 1Q16 1Q16 4Q16 1Q17 4Q16 1Q16 Revenue: Servicing fees $ 1,242 $ 1,289 $ 1,296 1% 4% $ 1,242 $ 1,289 $ 1,296 1% 4% Management fees 270 361 382 6 41 270 361 3
Slide 4: 1Q17 Highlights
1Q17 Highlights Operating-Basis (Non-GAAP) Progress on strategic priorities supported strong start to 2017 Results driven by strength in equity markets, installation of new business wins, strong ETF flows and State Street Beacon: Business momentum in asset servicing and asset management continued, d
Slide 5: Progress on strategic priorities in 1Q17
Progress on strategic priorities in 1Q17 Operating-Basis (Non-GAAP) Drive growth from Advance our digital Continue to invest Achieve our the core franchise leadership through in new products financial goals State Street Beacon and solutions • Strong AUCA growth (total • Driving adoption of accountin
Slide 6: Results driven by strength in equity markets, strong client flows and State Street Beacon
Results driven by strength in equity markets, strong client flows and State Street Beacon Operating-Basis (Non-GAAP) Diluted Earnings per Share (EPS) Return on Average Common Equity (ROE) ($) (%) +23% +200bps 1.46 1.48 12.3 12.5 1.35 11.1 1.21 10.4 0.98 8.4 1Q16 2Q16 3Q16 4Q16 1Q17 1Q16 2Q16 3Q16 4Q
Slide 7: Business momentum continues
Business momentum continues Assets Under Custody Assets Under and Administration (AUCA) Management (AUM) $ in trillions $ in billions +11% +12% +4% 4% 29.2 28.8 29.8 2,446 2,468 2,561 26.9 27.8 2,296 2,301 1Q16 2Q16 3Q16 4Q16 1Q17 1Q16 2Q16 3Q16 4Q16 1Q17 • Increased 11% from 1Q16 primarily reflecti
Slide 8: Fee revenue growth is primarily driven by continued business momentum
Fee revenue growth is primarily driven by continued business momentum Operating-Basis (Non-GAAP) Fee Revenue 1Q17 vs 1Q16: ($M) • Servicing fees increased primarily due to strengthening equity markets and net new business, partially offset by +12%, the stronger U.S. dollar and hedge fund outflows 4%
Slide 9: NII and NIM benefitted from higher U.S. interest rates as well as disciplined liability pricing
NII and NIM benefitted from higher U.S. interest rates as well as disciplined liability pricing Operating-Basis (Non-GAAP) NII1 and NIM 1Q17 vs 1Q16: ($M, %) • NII reflects higher U.S. interest rate environment as well as disciplined liability pricing, partially offset by lower NII +3%, interest ear
Slide 10: State Street Beacon contributing to continued expense control
State Street Beacon contributing to continued expense control Operating-Basis (Non-GAAP) Expenses Notable Items and GEAM: ($M) +6%, 3% due to GEAM • 6% expense growth from 1Q16, one-half of which (3%, or ~$51M) due to GEAM expenses 2,143 1,943 2,057 • Compensation and employee benefits in 1Q17 and 1
Slide 11: State Street Beacon is also driving enhanced client solutions, reduced operational risk and improved operations
State Street Beacon is also driving enhanced client solutions, reduced operational risk and improved operations Client Impact Risk Excellence Engaging the Enterprise • Improving the speed, quality, and • Automating controls: digitizing data and • Investing in the Workforce of the Future experience o
Slide 12: Continue to maintain high-quality balance sheet and strong capital ratios
Continue to maintain high-quality balance sheet and strong capital ratios 1Q171 Investment Portfolio Highlights 1Q17 Quarter-End Capital4 Positions as of March 31, 2017 %, as of March 31, 2017 4Q16 1Q17 • Size2: $94.5B • Credit profile: 92% rated AAA/AA Basel III Ratios: • Fixed-rate / floating-rate
Slide 13: Outlook for 2017 remains within our previously disclosed ranges
Outlook for 2017 remains within our previously disclosed ranges, with modest improvements in fee revenue, NII and taxes Operating-Basis (Non-GAAP) 2017 Outlook / Objective Category Assumptions (vs 2016 where applicable): Full-year 2017 total fee • 4-6% • Under the market conditions as of January 201
Slide 14: Appendix
Appendix The Way Ahead 14 State Street Beacon 15 The Acquired Operations of GE Asset Management 16 1Q17 vs 4Q16 Variances for Fee Revenue, NII and Expenses 17 – 19 Slide Footnotes 20 – 21 Forward Looking Statements 22 Non-GAAP Measures 23 Definitions 24 13
Slide 15: The Way Ahead
The Way Ahead 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 Core Digital Opportunities Capital Enterprise for Growth Aligning solutions Driving greater Acting
Slide 16: State Street Beacon on track to deliver financial benefits to be achieved through 2020
State Street Beacon on track to deliver financial benefits to be achieved through 2020 Expected Annual Pre-Tax Net • To achieve estimated annual pre-tax net run-rate expense savings of Run-Rate Expense Savings $550M by the end of 2020 for full effect in 20211: − Generated $175M in estimated annual p
Slide 17: The acquired GEAM operations have delivered accretive operating-basis earnings
The acquired GEAM operations have delivered accretive operating-basis1 earnings through the three-quarter period ended March 31, 2017 • Associated AUM2 of the acquired GEAM operations was $120B at March 31, 2017, up from the ~$110B announced at acquisition on July 1, 2016 • Excluding merger and inte
Slide 18: Fee revenue driven by continued business momentum
Fee revenue driven by continued business momentum Operating-Basis (Non-GAAP) Fee Revenue 1Q17 vs 4Q16: ($M) • Servicing fees increased primarily driven by the benefit +3% from strengthening equity markets • Management fees increased driven by strengthening 2,130 2,213 2,200 2,268 equity markets, net
Slide 19: NII and NIM benefitted from higher U.S. interest rates
NII and NIM benefitted from higher U.S. interest rates Operating-Basis (Non-GAAP) NII1 and NIM 1Q17 vs 4Q16: ($M, %) • NII reflects higher U.S. interest rate environment NII +1%, partially offset by a smaller, more efficient balance NIM +9bps sheet and more FX swaps qualifying for hedge 600 1.60 acc
Slide 20: State Street Beacon contributing to continued expense control
State Street Beacon contributing to continued expense control Operating-Basis (Non-GAAP) Expenses Notable Items: ($M) -4% • Compensation and employee benefits in 1Q17 and 2,143 1Q16 includes $154M and $122M, respectively, of 2,057 seasonal deferred incentive compensation expense for 1,943 1,909 1,82
Slide 21: Slide Footnotes
Slide Footnotes Footnotes to slide 2: 1 1Q17 operating-basis results include a pre-tax gain of ~$30M on the sale of State Street's interest in Boston Financial Data Services, Inc. (BFDS) and International Financial Data Services Limited (IFDS Ltd), reflecting a change in our operating-basis presenta
Slide 22: Slide Footnotes
Slide Footnotes Footnotes to slide 11: 1 As of period-end where applicable. 2 Investment portfolio includes the amortized cost of transferred securities at the time they were transferred. 3 Assumptions for NII include no change in client behavior, please see discussion in State Street’s 2016 Annual
Slide 23: Forward-looking statements
Forward-looking statements This presentation may contain statements considered “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 operations, strat
Slide 24: 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 results on a non-GAAP, or "operating" basis, as it believes that this presentation supports additional meaningful analysis
Slide 25: Definitions
Definitions Available-for-sale (AFS) Available for sale security that is purchased with the intent of holding before it reaches maturity AUCA Assets under custody and administration AUM Assets under management Diluted earnings per share Net income available to common shareholders divided by diluted