State Street Corporation · NYSE:STT
State Street — Barclays Annual Financial Services Conference 2017
34 slides from State Street's conference presentation, Sep 12, 2017
Slide 1: Building on our Strategy to Drive Sustainable Growth and Returns
0 Building on our Strategy to Drive Sustainable Growth and Returns Barclays Annual Financial Services Conference Eric W. Aboaf Chief Financial Officer Tuesday, September 12, 2017 Exhibit 99.1
Slide 2: Preface and forward-looking statements
1 This presentation contains forward-looking statements. These statements are not guarantees of future performance, are inherently uncertain, are based on assumptions that are difficult to predict and have a number of risks and uncertainties. The forward-looking statements in this presentation speak
Slide 3: Executive Summary
2 We have a broad-based franchise with a strong global footprint Well positioned for changing industry landscape and leading market positions support continued business growth opportunity Significant opportunity to expand our client base and deepen relationships Strong first half of 2017 as compared
Slide 4: Our focused franchise
3 Delivering new perspectives and insights into risk management and investment strategy Providing customized asset servicing solutions that support traditional and alternative investments Creating access to alpha, insights, liquidity and financing by enhancing portfolio values Providing access to in
Slide 5: State Street is a broad-based franchise with a strong global footprint
4 Equities $17.3 56% Fixed Income $10.1 32% State Street is a broad-based franchise with a strong global footprint Official Institutions Asset Owners Asset Managers Insurance Companies Alternative Asset Managers By Product Classification By Financial Instrument By Geographic Location AUCA of $31.0T
Slide 6: We are well positioned for a changing industry landscape
5 We are well positioned for a changing industry landscape • Defined Benefits (DB) to Defined Contribution (DC) and Retail shifts due to demographics (e.g., DC to IRA) driving new flows and requiring added tools and capabilities • Frozen DB plans require new skills, leading to new outsourcing • Glob
Slide 7: Our leading market positions support continued business growth opportunity
6 Our leading market positions support continued business growth opportunity STT, 20% ETFs1 Industry: ~$4T #1 in Servicing Alternative Investments2 Industry: ~$9T #1 in Hedge Funds #1 in Real Estate #2 in Private Equity Global STT, 54% Refer to the Appendix included with this presentation for footno
Slide 8: We see significant opportunities to expand our client base and relationships
7 Penetration of top 100 companies for mutual funds, insurance, pension funds and alternatives1: We see significant opportunities to expand our client base and relationships Refer to the Appendix included with this presentation for footnote 1. Industry Trends: Shift to Barbell Product Mix DC Expansi
Slide 9: Providing clients with access to specialized research, FX trading, securities lending
8 Providing clients with access to specialized research, Direct & Indirect FX trading, securities lending, Enhanced Custody, and innovative portfolio solutions to help enhance and preserve the value of clients’ portfolios Our suite of back to front office services and the expansion of outsourcing al
Slide 10: Actively measuring and managing margins and returns
9 Industry Trends: Shift to Barbell Product Mix DC Expansion and DB Contraction Active Outflows Products Globalizing Fee Compression Regulatory Pressure Strong ETF Growth Globally Power to Distribution Industry Consolidation Disruptive Technology Although we are focused on growth, we are also active
Slide 11: Growth in AUCA has been strong and accelerated in the last six quarters
10 Growth in AUCA has been strong and accelerated in the last six quarters AUCA $ in trillions as of period-end % YoY growth 26.9 27.8 29.2 28.8 29.8 31.0 (5%) 12% (10%) (5%) - 5% 10% 15% 20% 25% - 5 10 15 20 25 30 35 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 1H16 YoY ∆: (3%) 2H16 YoY ∆: 5% 1H17 YoY ∆: 12% 1H17
Slide 12: Continued business momentum has delivered strong fee revenue growth
11 Continued business momentum in the first half of 2017 has delivered strong fee revenue growth Fee Revenue $ in millions % Fee revenue YoY growth 2,033 2,130 2,213 2,200 2,268 2,324 (4%) 9% (35%) (30%) (25%) (20%) (15%) (10%) (5%) - 5% 10% 15% - 250 500 750 1,000 1,250 1,500 1,750 2,000 2,250 2,50
Slide 13: Higher NII & NIM driven by higher U.S. market interest rates
12 Higher NII & NIM primarily driven by higher U.S. market interest rates and disciplined liability management NII1 $ in millions % YoY growth Average Interest-Earning Assets & NIM $ in billions NIM % 539 546 537 547 553 617 (5%) 13% (10%) (5%) - 5% 10% 15% 20% 25% - 100 200 300 400 500 600 700 1Q16
Slide 14: Expense discipline helped generate positive operating leverage in 1H17
13 Careful pacing of investments and expense discipline helped generate positive operating leverage in 1H17 Expenses $ in Millions % YoY growth 1,943 1,828 1,909 2,143 2,057 1,960 0% 18% 7% 4% (5%) - 5% 10% 15% 20% - 500 1,000 1,500 2,000 2,500 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Fee Operating & Total Ope
Slide 15: Beacon's benefits are helping to fund investments
14 Year Over Year Changes: ∆ from 2015 to 2016 ∆ from 2016 to 2017 Expense benefits $210 $230 Investment expenses ($35) ($90) Net expense savings $175 $140 Beacon’s benefits are helping to fund investments to drive both future savings and future growth Breakdown of Benefits by Beacon Driver: (%) Con
Slide 16: Strong first half of 2017 resulting in 18% EPS growth and ROE of 12%
15 Strong first half of 2017 driven by broad-based performance, resulting in 18% EPS growth and ROE of 12% Operating-Basis (Non-GAAP)1,2 Diluted Earnings per Share (EPS) $ % YoY growth 0.98 1.46 1.35 1.48 1.21 1.67 (16%) 14% (20%) (10%) - 10% 20% 30% - 0.40 0.80 1.20 1.60 2.00 1Q16 2Q16 3Q16 4Q16 1Q
Slide 17: Focused on both sustainable growth and returns
16 Advance our digital leadership through Beacon We are focused on both sustainable growth and returns Continue to invest in new products and solutions Achieve our financial goals Drive growth from the core franchise
Slide 18: Questions and Answers
17 Questions and Answers Building on our Strategy to Drive Sustainable Growth and Returns Barclays Annual Financial Services Conference Eric W. Aboaf Chief Financial Officer Tuesday, September 12, 2017
Slide 19: Appendix
18 APPENDIX Slide footnotes 19 – 20 Forward looking statements 21 Reconciliations of Operating-Basis (Non-GAAP) Financial Information 22 – 31 Definitions 32 – 33
Slide 20: Slide footnotes
19 Slide footnotes Footnote to slide 3: 1 AUM reflects approximately $34 billion (as of June 30, 2017) with respect to which State Street Global Markets, LLC (SSGM) serves as marketing agent; SSGM and State Street Global Advisors (SSGA) are affiliated. Footnotes to slide 5: 1 Morningstar Direct. 2 B
Slide 21: Slide footnotes
20 Slide footnotes Footnotes to slide 11: 1 The 1Q17 operating-basis results included a pre-tax gain of approximately $30M on the sale of State Street's interest in Boston Financial Data Services, Inc. (BFDS) and International Financial Data Services Limited (IFDS U.K.), reflecting a change in our o
Slide 22: Forward-looking statements
21 This presentation contains “forward-looking statements”, including statements about our goals and expectations regarding our business, financial and capital condition, results of operations, strategies, financial portfolio performance, dividend and stock purchase programs, outcomes of legal proce
Slide 23: Reconciliation of operating-basis (non-GAAP) financial information
22 Reconciliation of operating-basis (non-GAAP) financial information We provide forward-looking financial estimates and expectations on an operating basis (non-GAAP) because information needed to provide corresponding GAAP-basis information is primarily dependent on future events or conditions that
Slide 24: Reconciliation of operating-basis (non-GAAP) financial information
23 Reconciliation of operating-basis (non-GAAP) financial information (Dollars in millions, except per share amounts, or where otherwise noted) 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 T o tal R evenue ( 1 ) ( 2 ) ( 3 ) : Total revenue, GAAP-basis 2,600$ 2,608$ 2,614$ 2,538$ 2,484$ 2,573$ 2
Slide 25: Reconciliation of operating-basis (non-GAAP) financial information
24 Reconciliation of operating-basis (non-GAAP) financial information 1Q16 vs. 1Q15 2Q17 vs. 2Q16 1H15 1H16 1H16 vs. 1H15 2H15 2H16 2H16 vs. 2H15 F ee R evenue ( 1 ) ( 3 ) : Total fee revenue, GAAP-basis (4)% 9 % 4,131$ 4,023$ (3)% 4,147$ 4,093$ (1)% Tax-equivalent adjustment associated with tax-adv
Slide 26: Reconciliation of operating-basis (non-GAAP) financial information
25 Reconciliation of operating-basis (non-GAAP) financial information 1H16 1H17 1H17 vs. 1H16 F ee R evenue ( 1 ) ( 3 ) : Total fee revenue, GAAP-basis 4,023$ 4,433$ 10 % Tax-equivalent adjustment associated with tax-advantaged investments 150 159 Gain on sale of WM /Reuters Business (53) - Expense
Slide 27: Reconciliation of operating-basis (non-GAAP) financial information
26 Reconciliation of operating-basis (non-GAAP) financial information 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 1Q16 vs. 1Q15 2Q17 vs. 2Q16 N et Interest Inco me & N et Interest M argin ( 2 ) ( 4 ) : Net interest income, GAAP-basis 546$ 535$ 513$ 494$ 512$ 521$ 537$ 514$ 510$ 575$ (6)% 10 %
Slide 28: Reconciliation of operating-basis (non-GAAP) financial information
27 Reconciliation of operating-basis (non-GAAP) financial information 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 1Q16 vs. 1Q15 2Q17 vs. 2Q16 Expenses ( 3 ) : Total expenses, GAAP-basis 2,097$ 2,134$ 1,962$ 1,857$ 2,050$ 1,860$ 1,984$ 2,183$ 2,086$ 2,031$ (2.2)% 9.2 % Severance costs associate
Slide 29: Reconciliation of operating-basis (non-GAAP) financial information
28 Reconciliation of operating-basis (non-GAAP) financial information 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 1Q16 vs. 1Q15 2Q17 vs. 2Q16 D iluted Earnings per C o mmo n Share ( 1 ) ( 2 ) : Diluted earnings per common share, GAAP-basis 0.89$ 0.93$ 1.31$ 1.34$ 0.79$ 1.47$ 1.29$ 1.43$ 1.15$
Slide 30: Reconciliation of operating-basis (non-GAAP) financial information
29 Reconciliation of operating-basis (non-GAAP) financial information 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Return on Average Common E quity ( 1) ( 2 ) : Return on average common equity, GAAP-basis 7.9 % 8.2 % 11.3 % 11.6 % 6.8 % 12.4 % 10.6 % 12.1 % 9.9 % 12.6 % (110) bps 20 bps Severan
Slide 31: Reconciliation of operating-basis (non-GAAP) financial information
30 Reconciliation of operating-basis (non-GAAP) financial information 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 F ee Operat ing Leverage, GA A P -B asis: Total fee revenue, GAAP-basis (as reconciled above) 2,055$ 2,076$ 2,103$ 2,044$ 1,970$ 2,053$ 2,079$ 2,014$ 2,198$ 2,235$ Total expenses,
Slide 32: Reconciliation of operating-basis (non-GAAP) financial information
31 Reconciliation of operating-basis (non-GAAP) financial information 4Q15 4Q16 F ee Operat ing Leverage, Operat ing-B asis ( 1 ) : Total fee revenue, operating-basis (as reconciled above) 2,075$ 2,200$ Total expenses, operating-basis (as reconciled above) 1,820 2,143 Impact o f accelerated compensa
Slide 33: Definitions
32 AIFMD Alternative Investment Fund Managers Directive AUCA Assets under custody and administration AUM Assets under management Beacon Multi-year transformational effort with an objective to deliver best-in-class service and solutions, end-to-end service delivery, agile methodologies, client-centri
Slide 34: Definitions
33 GAAP Generally Accepted Accounting Principles GE Asset Management (GEAM) The acquired GE Asset Management operations GLD SPDR gold shares is part of the SPDR family of ETFs, where SSGA act as the marketing agent IRA Individual retirement account M&A Mergers & acquisition MiFID II Markets in Finan
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