Slide 1: Second Quarter 2017 Financial Highlights
Second Quarter 2017 Financial Highlights July 26, 2017 (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 2017 financial results. That news release contains a more detailed discussion of many of the matters descr
Slide 3: Summary of GAAP & Operating-basis (non-GAAP) Results
Summary of GAAP & Operating-basis (non-GAAP) Results GAAP-basis Financials Operating-basis Financials $ in millions, except per share data Quarters %∆ Quarters %∆ 2Q16 1Q17 2Q17 1Q17 2Q16 2Q16 1Q17 2Q17 1Q17 2Q16 Revenue: Servicing fees $ 1,239 $ 1,296 $ 1,339 3% 8% $ 1,287 $ 1,296 $ 1,339 3% 4% Man
Slide 4: 2Q17 Highlights
2Q17 Highlights Operating-Basis (Non-GAAP) Progress on strategic priorities supported a strong quarter and first half of the year 2Q17 results driven by continued strength in equity markets, broad-based new business activity, and higher U.S. market interest rates: Growth in AUCA and AUM led to our h
Slide 5: Progress on strategic priorities in 2Q17
Progress on strategic priorities in 2Q17 supported a strong first half of the year 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 Beacon and solutions • Growth of 12% in AUCA and •
Slide 6: Results driven by higher equity markets and broad-based new business wins
Results driven by higher equity markets and broad-based new business wins Operating-Basis (Non-GAAP)1 Diluted EPS ROE ($) (%) +14% +140bps 1.67 13.7 1.46 1.48 12.3 12.5 1.35 11.1 1.21 10.4 2Q16 3Q16 4Q16 1Q17 2Q17 2Q16 3Q16 4Q16 1Q17 2Q17 2Q17 financial highlights compared to 2Q16: • EPS growth of 1
Slide 7: Market growth and continued business momentum across product areas
Market growth and continued business momentum across product areas lifted AUCA and AUM to our highest levels Assets Under Custody Assets Under and Administration (AUCA) Management (AUM) $ in trillions, as of period-end $ in billions, as of period-end +12% +13% +4% +2% 29.2 29.8 31.0 2,468 2,561 2,60
Slide 8: Strong fee revenue growth driven by both higher equity markets and client business activity
Strong fee revenue growth driven by both higher equity markets and client business activity Operating-Basis (Non-GAAP)1 Fee Revenue 2Q17 vs 2Q16: ($M) • Servicing fees increased primarily due to strengthening +9%, 3% due to GEAM equity markets, net new business and client flows • Management fees inc
Slide 9: Higher U.S. market interest rates, disciplined liability pricing, and improvements in liability mix
Higher U.S. market interest rates, disciplined liability pricing, and improvements in liability mix resulted in higher NII and NIM Operating-Basis (Non-GAAP) NII1 and NIM 2Q17 vs 2Q16: ($M, %) • NII and NIM increased primarily due to the higher U.S. market interest rate environment, continued discip
Slide 10: Expenses continue to support new business activity, offset by savings from Beacon
Expenses continue to support new business activity, offset by savings from Beacon Operating-Basis (Non-GAAP) Expenses +7%, Notable Items & GEAM: ($M) 3% due to GEAM • 7% expense growth from 2Q16, with 3% or ~$51M due 2,143 to expenses related to the acquired GEAM business 2,057 1,909 2491 1,960 2Q17
Slide 11: Beacon initiatives are driving value to clients and across the enterprise
Beacon initiatives are driving value to clients and across the enterprise Category: Key Initiatives: Highlights: •Improving speed, quality, and client experience •Transaction Processing: Improved straight through processing (STP), across Global Services, including: enhancing controls & services, whi
Slide 12: Beacon's benefits are helping to fund investments
Beacon’s benefits are helping to fund investments to drive both future savings and future growth Operating-Basis (Non-GAAP) Breakdown of Benefits by Beacon Driver: (%) Contribution to Gross 2016 2017 Expense Benefits Actual Estimate Transaction Processing, Fund Driving Beacon Operating-Basis Financi
Slide 13: Continue to maintain a high-quality balance sheet and strong capital ratios
Continue to maintain a high-quality balance sheet and strong capital ratios 2Q171 Investment Portfolio Highlights 2Q17 Quarter-End Capital3 Positions as of June 30, 2017 %, as of June 30, 2017 Investment Portfolio: Capital Ratios: 4Q16 1Q17 2Q17 • Size2: $95.0B Basel III Ratios: • Credit profile: 91
Slide 14: Outlook for 2017 improved driven by supportive conditions
Outlook for 2017 improved driven by supportive conditions Operating-Basis (Non-GAAP) 2017 Outlook / Objective Category Assumptions (vs 2016 where applicable): Full-year 2017 total fee • 6 - 7% • Under the market conditions as of July 2017 (previously January revenue growth: • Previously 4 - 6% 2017)
Slide 15: APPENDIX
APPENDIX YTD GAAP & Operating-basis (non-GAAP) Results 15 The Way Ahead 16 Beacon 17 The Acquired Operations of GE Asset Management 18 2Q17 vs 1Q17 Variances for Fee Revenue, NII and Expenses 19 – 21 Slide Footnotes 22 – 23 Forward Looking Statements 24 Non-GAAP Measures 25 Definitions 26 14
Slide 16: Summary of YTD GAAP & Operating-basis (non-GAAP) Results
Summary of YTD GAAP & Operating-basis (non-GAAP) Results GAAP-basis Financials Operating-basis Financials $ in millions, except per share data YTD YTD %∆ YTD YTD %∆ 2Q16 2Q17 YTD 2Q16 2Q17 YTD Revenue: Servicing fees $ 2,481 $ 2,635 6% $ 2,529 $ 2,635 4% Management fees 563 779 38 558 779 40 Foreign
Slide 17: The Way Ahead
The Way Ahead Long-term Shareholder Value Operating-Basis Financial Goals1 Revenue Growth of 8%-12%, EPS Growth of 10%-15% and ROE of 12%-15% Building on Achieving a Investing in Maintaining Our Strong Digital Opportunities Financial Core Enterprise for Growth Strength Aligning solutions Driving gre
Slide 18: Beacon on track to deliver financial benefits to be achieved through 2020
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 pre-tax expens
Slide 19: GE Asset Management operations are financially accretive
GE Asset Management operations are financially accretive to 1Q17 and 2Q17 earnings, excluding merger & integration charges, and the integration is largely complete • Associated AUM1 of the acquired GEAM operations was $125B at June 30, 2017, up from the ~$110B announced at acquisition on July 1, 201
Slide 20: Market growth and business momentum continued to support fee revenue growth
Market growth and business momentum continued to support fee revenue growth Operating-Basis (Non-GAAP)1 Fee Revenue 2Q17 vs 1Q17: ($M) • Servicing fees increased primarily due to higher equity +3% markets, the impact of the weaker U.S. dollar, and net new business 2,268 2,324 • Management fees incre
Slide 21: Higher U.S. market interest rates and improvements in liability mix
Higher U.S. market interest rates and improvements in liability mix resulted in higher NII and NIM Operating-Basis (Non-GAAP) NII1 and NIM 2Q17 vs 1Q17: ($M, %) • NII and NIM increased primarily due to the higher U.S. NII +12% market interest rate environment and improvements in NIM +10bps liability
Slide 22: Expenses continue to support new business activity, offset by savings from Beacon
Expenses continue to support new business activity, offset by savings from Beacon Operating-Basis (Non-GAAP) Expenses 2Q17 vs 1Q17: ($M) • Compensation and employee benefits decreased -5% 2,143 primarily due to the seasonal deferred incentive 2,057 1,909 2491 1,960 compensation expense in 1Q17 and s
Slide 23: Slide Footnotes
Slide Footnotes Footnotes to slide 2 & 15: 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 Ltd), reflecting a change in our o
Slide 24: Slide Footnotes
Slide Footnotes Footnote to slides 9 & 21: 1 Total expenses of $2,143M for 4Q16 included $249M of accelerated compensation expense. Excluding this amount, total expenses for 4Q16 were $1,894M. Total expenses of $2,057M for 1Q17 included $154M of seasonal deferred incentive compensation expense for r
Slide 25: Forward-looking statements
Forward-looking statements This presentation 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 operations, strategies, the financial and ma
Slide 26: 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 27: Definitions
Definitions Available-for-sale (AFS) Available for sale security that is purchased with the intent of holding before it reaches maturity AUA Assets under administration AUCA Assets under custody and administration AUM Assets under management Bps Basis points Diluted earnings per share (EPS) Net inco