State Street Corporation · NYSE:STT
State Street — Q3 2016 Earnings Presentation
24 slides from State Street's earnings presentation, Oct 26, 2016
Slide 1: Third-Quarter 2016 Financial Highlights
State Street Corporation Third-Quarter 2016 Financial Highlights October 26, 2016
Slide 2: Forward-Looking Statements
This presentation includes certain highlights of, and also material supplemental to, State Street Corporation’s (State Street’s) news release announcing its third quarter 2016 financial results. That news release contains a more detailed discussion of many of the matters described in this presentati
Slide 3: Our focused strategy supports long-term financial goals
Our focused strategy supports long-term financial goals 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 DIGITAL OPPORTUNITIES CAPITAL CORE ENTERPRISE FOR GROWTH
Slide 4: Summary of GAAP-Basis Results
Summary of GAAP-Basis Results Quarters % Change 3Q16 3Q16 vs vs $ in millions 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 3Q15 2Q16 Fee revenue: Servicing fees $ 1,296 $ 1,296 $ 1,268 $ 1,319 $ 1,289 $ 1,277 $ 1,242 $ 1,239 $ 1,303 1.1% 5.2% Management fees 316 299 301 304 287 282 270 293 368 28.2
Slide 5: Continued progress on our strategic priorities
Continued progress on our strategic priorities 2016 Performance Through YTD3Q161 Strategic Priorities: (Versus 2015 Through YTD3Q15 Where Applicable): 1. Become a digital leader • New solutions delivering improved experience to clients including Net Asset Value (NAV) Oversight, in financial services
Slide 6: 3Q16 results driven by improved market conditions, business momentum and strong expense control
3Q16 results driven by improved market conditions, business momentum and strong expense control Operating-Basis (Non-GAAP) EPS1 3Q16 Operating-Basis (Non-GAAP) Financial ($) 3Q16 vs 3Q15 Highlights1 +17.4% 1.46 YTD3Q16 compared to YTD3Q15: 1.35 • EPS of $3.79 increased 3.0% 1.15 1.21 • Total fee rev
Slide 7: Generated positive fee operating leverage in 3Q16 versus 3Q15 due to strong expense management
Generated positive fee operating leverage in 3Q16 versus 3Q15 due to strong expense management Operating-Basis (Non-GAAP) Results1 Revenue ($M) Operating Leverage2 +4.2% (3Q16 vs 3Q15) The acquired GEAM 3Q16 vs 3Q15 2,642 2,754 operations reduced 65 operating leverage2 1.6%, excluding 4.24 acquired
Slide 8: We have now achieved positive fee operating leverage for the first nine months of 2016
We have now achieved positive fee operating leverage for the first nine months of 2016 relative to the same period in 2015 Operating-Basis (Non-GAAP) Results1 Revenue ($M) Operating Leverage2 (YTD3Q16 vs YTD3Q15) The acquired GEAM -0.5% YTD3Q16 vs operations reduced 8,041 8,003 YTD3Q15 65 operating
Slide 9: 3Q16 operating-basis fee revenue was up 5% from 3Q15
3Q16 operating-basis1 fee revenue was up 5% from 3Q15 primarily due to contribution from the acquired GEAM operations, improved market conditions and new business wins Notable Items: Operating-Basis (Non-GAAP) Revenue1 • Estimated contribution from the acquired GEAM2 operations of $65M to fee revenu
Slide 10: 3Q16 net interest revenue and NIM benefitted from higher Federal Funds Rate
3Q16 net interest revenue (NIR) and NIM benefitted from higher Federal Funds Rate at end of 4Q15 and continued disciplined liability pricing Average Earning Assets Operating-Basis (Non-GAAP)1 NIR and NIM ($B) ($M, %) NIR NIR 3Q16 vs 3Q15 3Q16 vs 2Q16 3Q16 vs 3Q15 3Q16 vs 2Q16 +1.5% -1.6% -8.6% +2.0%
Slide 11: Expenses in 3Q16 impacted by the acquired GEAM operations
Expenses in 3Q16 impacted by the acquired GEAM operations, while benefitting from continued State Street Beacon savings Notable Items: • Estimated contribution from the acquired GEAM operations of 2 $57M to expenses, primarily in compensation and benefits Operating-Basis (Non-GAAP) Expenses1 expense
Slide 12: Continue to maintain high-quality balance sheet…
Continue to maintain high-quality balance sheet… 3Q161 Balance Sheet Highlights Investment • Size: $99.13B portfolio • Credit profile: 92.5% rated AAA/AA • Fixed-rate/floating-rate mix: 66%/34% • Duration: 2.1 years • Unrealized after-tax mark-to-market (MTM) gain: $703M • Purchases2: $6.3B with ave
Slide 13: …and our capital ratios remain strong
…and our capital ratios remain strong 3Q16 Quarter-End Capital1 Positions June 30, Sept 30, 2016 2016 Basel III Ratios2: • Common equity tier 1 Common equity tier 1 ratio (advanced approaches) 12.0% 12.3% standardized approach Common equity tier 1 ratio (standardized approach) 12.0% 12.5% increased
Slide 14: The acquired GEAM business is on track to deliver accretive operating-basis earnings
The acquired GEAM business is on track to deliver accretive operating-basis1 earnings for the 12 months ending June 30, 2017 • Transaction closed on July 1, 2016: – 94% of the purchase price, which includes the initial purchase price of approximately $437M and approximately $46M related to future op
Slide 15: Updated 2016 Outlook: We expect to achieve our 2016 objectives
Updated 2016 Outlook1: We expect to achieve our 2016 objectives • Expect to achieve modest positive fee operating leverage for 2016 relative to 2015 excluding the contributions of the acquired GEAM operations: – Expect approximately flat operating-basis fee revenue growth for full year 2016 compared
Slide 16: Appendix
Appendix State Street Beacon 17 Footnotes to Slides 5, 13 & 15 18-20 Definition of Metrics 21-22 Non-GAAP Measures, Regulatory Capital Ratios and 23-24 Reconciliations 16
Slide 17: 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: − Expect to generate at least $165M in
Slide 18: Footnotes to Slides
Footnotes to Slides 5, 13 & 15 18
Slide 19: Footnotes to slides
Footnotes to slides 5 Footnotes to slide 5: 1 Includes operating-basis (non-GAAP) financial information. Operating-basis financial performance and outlook are a non-GAAP presentation. Refer to the addendum linked to this presentation for explanations of our non-GAAP financial measures and for reconc
Slide 20: Footnotes to slide 13 & 15
Footnotes to slide 13 & 15 Footnotes to slide 13: 1 Unless otherwise specified, all capital ratios referenced on slide 13 and elsewhere in this presentation refer to State Street Corporation, or State Street, and not State Street Bank and Trust Company, or State Street Bank. The lower of our capital
Slide 21: Definition of Metrics
Definition of Metrics STATE STREET. 21
Slide 22: Definition of Metrics
Definition of Metrics Diluted earnings Net income available to common shareholders divided by diluted average per share (EPS) common shares outstanding Return on equity (Net income less dividends on preferred stock) divided by average common equity (ROE) Pre-tax Income before income tax expense divi
Slide 23: Non-GAAP Measures, Regulatory Capital Ratios and Reconciliations
Non-GAAP Measures, Regulatory Capital Ratios and Reconciliations 23
Slide 24: Non-GAAP measures, regulatory capital ratios and reconciliations
Non-GAAP measures, regulatory capital ratios and reconciliations 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 presen