Slide 1: First-Quarter 2016 Financial Highlights
State Street Corporation First-Quarter 2016 Financial Highlights April 27, 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 first quarter 2016 financial results. That news release contains a more detailed discussion of many of the matters described in this presentati
Slide 3: Focused strategy supports long-term financial goals
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 Ali
Slide 4: Made progress in 1Q16 on State Street's transformation
Made progress in 1Q16 on State Street’s transformation in the new competitive environment, while continuing to deliver value in the short term 2016 Performance Through March 31, 2016 Strategic Priorities: (Versus 2015 Through March 31, 2015 Where Applicable): 1. We have a bold vision and • Continued
Slide 5: Summary of GAAP-Basis Results
Summary of GAAP-Basis Results Quarters % Change 1Q16 1Q16 vs vs $ in millions, except per share data 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 1Q15 4Q15 Revenue $ 2,480 $ 2,593 $ 2,576 $ 2,625 $ 2,600 $ 2,608 $ 2,614 $ 2,538 $ 2,484 (4.5)% (2.1)% Expenses 2,028 1,850 1,892 2,057 2,097 2,134 1,962
Slide 6: GAAP-Basis Revenue
GAAP-Basis Revenue Quarters % Change 1Q16 1Q16 vs vs $ in millions 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 1Q15 4Q15 Servicing fees $ 1,233 $ 1,283 $ 1,296 $ 1,296 $ 1,268 $ 1,319 $ 1,289 $ 1,277 $ 1,242 (2.1)% (2.7)% Management fees 292 300 316 299 301 304 287 282 270 (10.3) (4.3) Trading serv
Slide 7: GAAP-Basis Expenses
GAAP-Basis Expenses Quarters % Change 1Q16 1Q16 vs vs $ in millions 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 1Q15 4Q15 Compensation and employee $ 1,157 $ 978 $ 953 $ 972 $ 1,087 $ 984 $ 1,051 $ 939 $ 1,107 1.8% 17.9% benefits Information systems and 244 244 242 246 247 249 265 261 272 10.1 4.2
Slide 8: 1Q16 fee revenues impacted by challenging market environment
1Q16 fee revenues impacted by challenging market environment, however expense control held expenses flat with 1Q15 1Q16 Operating-Basis (Non-GAAP) Financial Highlights1 • EPS: – Operating-basis EPS of $0.98 decreased 16% from 1Q15 and 19% from 4Q15 – Compared to 4Q15, pre-tax expenses and EPS includ
Slide 9: 1Q16 revenue growth impacted by challenging environment, expenses approx. flat
1Q16 revenue growth impacted by challenging environment, but expense control kept expenses approx. flat from 1Q15 Operating-Basis (Non-GAAP) Results1 Revenue ($M) Operating Leverage -3.7% 1Q16 (Revenue Growth (%) less Expense Growth 2,672 2,574 vs (%); 1Q16 vs 1Q15) 1Q15 0.1 2,108 2,033 (3.6%) -372b
Slide 10: 1Q16 EPS decreased relative to strong 1Q15 market environment
1Q16 EPS decreased relative to the strong 1Q15 market environment, partially offset by the impact of the share buyback Operating-Basis (Non-GAAP) EPS1 ($) 1Q16 vs 1Q15 -15.5% • 1Q16 operating-basis EPS decreased 1.36 from 4Q15, primarily due to lower fee 1.16 1.15 1.21 revenue and higher expenses as
Slide 11: 1Q16 Fee revenue down modestly from 4Q15; NIR increased
1Q16 Fee revenue down modestly from 4Q15 primarily due to market conditions; NIR increased from 4Q15 Notable items in 1Q16: • Money market fee waivers not meaningful and Performance fees of $2M Operating-Basis (Non-GAAP) Revenue1 Notable Operating-basis (non-GAAP)1 variances 1Q16 vs 1Q15: ($M) • The
Slide 12: 1Q16 NIR and NIM benefitted from higher Federal funds rate
1Q16 NIR and NIM benefitted from higher Federal funds rate at end of 4Q15 and disciplined liability pricing Average Earning Assets Operating-Basis (Non-GAAP)1 NIR and NIM ($B) ($M, %) NIR NIR 1Q16 vs 1Q15 1Q16 vs 4Q15 1Q16 vs 1Q15 1Q16 vs 4Q15 -4.6% +5.1% -14.3% -3.4% 600 565 556 539 2.00 226 233 52
Slide 13: Expense control resulted in flat operating expenses relative to 1Q15
Expense control in 1Q16 resulted in flat operating expenses relative to 1Q15 and State Street Beacon remains on track Operating-Basis (Non-GAAP) Expenses1 Notable Operating-basis (non-GAAP)1 variances 1Q16 vs 1Q15: ($M) • The stronger U.S. dollar favorably impacted total expenses by approximately $1
Slide 14: Continue to maintain high-quality balance sheet
Continue to maintain high-quality balance sheet… 1Q161 Balance Sheet Highlights Investment • Size: $101.8B portfolio2 • Credit profile: 93.3% rated AAA/AA • Fixed-rate/floating-rate mix: 65%/35% • Duration: 2.0 years • Unrealized after-tax mark-to-market (MTM) gain: $522M • Purchases3: $6B with aver
Slide 15: ...and our capital ratios remain strong
…and our capital ratios remain strong 1Q16 Quarter-End Capital1 Positions Dec 31, Mar 31, 2015 2016 Basel III Ratios2: • Common equity tier 1 Common equity tier 1 ratio (advanced approaches) 12.5% 12.3% standardized approach Common equity tier 1 ratio (standardized approach) 13.0% 12.5% decreased ap
Slide 16: Recent agreement to acquire GE Asset Management
Recent agreement to acquire GE Asset Management (GEAM) extends our core investment management capabilities, including in the high growth outsourced CIO market • Will create a powerful value proposition for clients: – Expands SSGA’s alternatives capabilities while enhancing our active equity and fixe
Slide 17: Updated 2016 Outlook
Updated 2016 Outlook1: Environment improved in March and managing expenses remains a high priority • Environment improved in March 2016 and managing expenses remains a high priority: –Continue to expect moderate operating-basis expense growth2 of up to 2% for full year 2016 compared to full year 201
Slide 18: Appendix
Appendix State Street Beacon 19 Impact of Currency Translation 20-22 Footnotes to Slides 4 & 15 23-24 Operating-Basis (Non-GAAP) Results 25-28 Investment Portfolio 29-33 Definition of Metrics 34-35 Non-GAAP Measures, Regulatory Capital Ratios and 36-37 Reconciliations 18
Slide 19: State Street Beacon on track to deliver financial benefits 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: − On track to deliver at least $100M in
Slide 20: Impact of Currency Translation
Impact of Currency Translation 20
Slide 21: 1Q16 revenue and expenses impacted by currency translation vs 1Q15
1Q16 operating-basis revenue1 was negatively impacted and operating-basis expenses1 were positively impacted by currency translation when compared to 1Q152 Operating-Basis Fee Revenue1 ($M) Operating-Basis NIR1 ($M) -2.8% -3.9% 2,108 2,033 2,048 565 543 539 153 15 4 4 1Q15 1Q16 Impact of 1Q16 1Q15 1
Slide 22: Impact of currency translation smaller vs 4Q15
Impact of currency translation was smaller on 1Q16 when compared to 4Q151 relative to the larger change when compared to 1Q15 Operating-Basis NIR ($M) 2 Operating-Basis Fee Revenue2 ($M) +5.5% -1.8% 539 541 2,075 2,033 2,037 513 2 2 4 4 4Q15 1Q16 Impact of 1Q16 4Q15 1Q16 Impact of 1Q16 Reported Repo
Slide 23: Footnote to Slides 4 & 15
Footnote to Slides 4&15 STATE STREET. 23
Slide 24: Footnotes to slides 4 & 15
Footnotes to slides 4 & 15 Footnotes to slide 4: 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 r
Slide 25: Operating-Basis (non-GAAP) Results
Operating- Basis (non- GAAP) Results 25
Slide 26: Summary of Operating-Basis (Non-GAAP) Results
Summary of Operating-Basis (Non-GAAP) Results1 Quarters % Change 1Q16 1Q16 vs vs $ in millions, except per share data 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 1Q15 4Q15 Revenue $ 2,554 $ 2,671 $ 2,672 $ 2,719 $ 2,672 $ 2,727 $ 2,642 $ 2,588 $ 2,574 (3.7)% (0.5)% Expenses 1,917 1,818 1,808 1,880
Slide 27: Operating-Basis (Non-GAAP) Revenue
Operating-Basis (Non-GAAP) Revenue1 Quarters % Change 1Q16 1Q16 vs vs $ in millions 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 1Q15 4Q15 Servicing fees $ 1,233 $ 1,283 $ 1,296 $ 1,296 $ 1,268 $ 1,319 $ 1,289 $ 1,277 $ 1,242 (2.1)% (2.7)% Management fees 292 300 316 299 301 304 287 282 270 (10.3) (
Slide 28: Operating-Basis (Non-GAAP) Expenses
Operating-Basis (Non-GAAP) Expenses1 Quarters % Change 1Q16 1Q16 vs vs $ in millions 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 1Q15 4Q15 Compensation and employee $ 1,085 $ 974 $ 955 $ 962 $ 1,088 $ 984 $ 976 $ 940 $ 1,104 1.5% 17.4% benefits Information systems and 244 244 242 246 247 249 265 26
Slide 29: Investment Portfolio
Investment Portfolio STATE STREET. 29
Slide 30: Investment portfolio consists of government & agency, structured securities and unsecured credit
Investment portfolio consists of government & agency, structured securities and unsecured credit Balances1 as of March 31, 2016 Government / Agency Structured Securities Unsecured Credit Treasuries Asset-backed securities (ABS) Corporate bonds Agency debentures Mortgage-backed Municipals securities
Slide 31: Investment portfolio has high quality assets
Investment portfolio has high quality assets Investment portfolio credit ratings • 93.3% rated AAA/AA • Unrealized after-tax mark-to-market (MTM) gain of $522 million 1 • Diversified by asset class and geography U.S. Book Value, Treasuries & Unrealized After-tax $ in billions Agencies 2 AAA AA A BBB
Slide 32: Investment portfolio has high quality assets across asset classes
Investment portfolio has high quality assets across asset classes Holdings by Asset Class as of March 31, 2016 Ratings Unrealized After-tax MTM Book Value Book Value Gain / (Loss) Fixed Rate/ UST/AGY3 AAA AA A BBB <BBB NR4 ($B)1 (% Total)1 ($M)2 Floating Rate Government & agency securities 84% 8% 4%
Slide 33: Investment portfolio non-U.S. investments
Investment portfolio non-U.S. investments Investment Portfolio non-U.S. Investments as of March 31, 2016 AAA, 77.8% AA, 10.3% A, 9.4% BBB 1.5% BB, 0.5% <BB, 0.5% Gov't/Agency, 22.0% ABS/FRMBS, 41.1% ABS All Other, 16.2% Corporate, 3.3% Covered, 14.1% Other, 3.3% 1 Sovereign debt is reflected in the
Slide 34: Definition of Metrics
Definition of Metrics STATE STREET. 34
Slide 35: 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 36: Non-GAAP Measures, Regulatory Capital Ratios and Reconciliations
Non-GAAP Measures, Regulatory Capital Ratios and Reconciliations 36
Slide 37: 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, referred to as GAAP, and used in the calculation of identified capital ratios, management also presents result