Slide 1: Second-Quarter 2016 Financial Highlights
State Street Corporation Second-Quarter 2016 Financial Highlights July 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 second quarter 2016 financial results. That news release contains a more detailed discussion of many of the matters described in this presentat
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: Summary of GAAP-Basis Results
Summary of GAAP-Basis Results Quarters % Change 2Q16 2Q16 vs vs $ in millions 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 2Q15 1Q16 Fee revenue: Servicing fees $ 1,283 $ 1,296 $ 1,296 $ 1,268 $ 1,319 $ 1,289 $ 1,277 $ 1,242 $ 1,239 (6.1)% (0.2)% Management fees 300 316 299 301 304 287 282 270 293 (
Slide 5: Made substantive progress in first half of 2016 on State Street's transformation
Made substantive progress in first half of 2016 on State Street’s transformation while delivering value in the short term 2016 Performance Through June 30, 20161 Strategic Priorities: (Versus 2015 Through June 30, 2015 Where Applicable): 1. Become a digital leader in • Continued progress on State St
Slide 6: Despite the Brexit vote, Europe and the UK continue to represent a significant opportunity
Despite the Brexit vote, Europe and the UK continue to represent a significant opportunity for us • With $30T in investable assets, Europe is 35% of world AUM and is expected to grow approximately 30% by 20201 • Gross domestic product trends and economic outlook reinforce high net savings rates2 whi
Slide 7: 2Q16 fee revenues supported by improved market environment and seasonal up-tick
2Q16 fee revenues supported by improved market environment from 1Q16 and the seasonal up-tick in securities finance, while expense control reduced expenses compared to 2Q15 2Q16 Operating-Basis (Non-GAAP) Financial Highlights1 YTD16 compared to YTD15: 2Q16 highlights: • Operating-basis EPS of $2.44
Slide 8: 2Q16 EPS increased relative to the weak 1Q15 market environment
2Q16 EPS increased relative to the weak 1Q15 market environment and benefited from the seasonal up-tick in securities finance, while compared to 2Q15 the share buyback and disciplined expense control drove the improvement in 2Q16 EPS Operating-Basis (Non-GAAP) EPS1 ($) 2Q16 vs 2Q15 • 2Q16 operating-
Slide 9: Generated positive fee operating leverage in 2Q16 versus 2Q15
Generated positive fee operating leverage in 2Q16 versus 2Q15 due to strong expense management Operating-Basis (Non-GAAP) Results1 Revenue ($M) Operating Leverage2 (Revenue Growth (%) less Expense Growth (%); -1.9% 2Q16 vs 2Q15) 2Q16 2,727 2,675 vs 2Q15 2,174 2,130 (2.0)% -1.9 +91bps 556 546 (1.8)%
Slide 10: Substantial progress on expense reductions reduced the fee operating leverage gap
Substantial progress on expense reductions in 2Q16 reduced the fee operating leverage gap from 1Q16 Operating-Basis (Non-GAAP) Results1 Revenue ($M) Operating Leverage2 (Revenue Growth (%) less Expense Growth -2.8% 6/30/16 YTD (%); 6/30/16 YTD vs 6/30/15 YTD) 5,399 5,249 vs 6/30/15 YTD 4,282 4,163 (
Slide 11: 2Q16 Fee revenue up 5% from 1Q16
2Q16 Fee revenue up 5% from 1Q16 primarily due to improved market conditions and the seasonal up-tick in securities finance Operating-Basis (Non-GAAP) Revenue1 Notable operating-basis (non-GAAP)1 variances 2Q16 vs 2Q15: ($M) • Servicing fees were down 2.4% compared to 2Q15 primarily due to lower glo
Slide 12: 2Q16 net interest revenue and net interest margin benefitted from higher Federal funds rate
2Q16 net interest revenue (NIR) and net interest margin (NIM) benefitted from higher Federal funds rate at end of 4Q15 and disciplined liability pricing Average Earning Assets Operating-Basis (Non-GAAP)1 NIR and NIM ($B) ($M, %) NIR NIR 2Q16 vs 2Q15 2Q16 vs 1Q16 -1.8% +1.3% 2Q16 vs 2Q15 2Q16 vs 1Q16
Slide 13: Expense control in 2Q16 resulted in lower operating expenses relative to 2Q15
Expense control in 2Q16 resulted in lower operating expenses relative to 2Q15, and State Street Beacon savings accelerated in 2Q16 Operating-Basis (Non-GAAP) Expenses1 ($M) 2Q16 vs 2Q15 2Q16 vs 1Q16 Notable operating-basis (non-GAAP)1 variances 2Q16 vs 2Q15: -2.8% -5.9% • Compensation and employee b
Slide 14: Continue to maintain high-quality balance sheet
Continue to maintain high-quality balance sheet… 2Q161 Balance Sheet Highlights Investment • Size: $102.30B portfolio2 • Credit profile: 93% rated AAA/AA • Fixed-rate/floating-rate mix: 67%/33% • Duration: 2.0 years • Unrealized after-tax mark-to-market (MTM) gain: $796M • Purchases3: $6.6B with ave
Slide 15: ...and our capital ratios remain strong
…and our capital ratios remain strong 2Q16 Quarter-End Capital1 Positions Mar 31, June 30, 2016 2016 Basel III Ratios2: • Common equity tier 1 Common equity tier 1 ratio (advanced approaches) 12.3% 12.0% standardized approach Common equity tier 1 ratio (standardized approach) 12.5% 12.0% decreased a
Slide 16: Acquisition of GE Asset Management extends our core investment management capabilities
Acquisition of GE Asset Management (GEAM) on July 1, 2016 extends our core investment management capabilities, including in the high growth outsourced CIO market • Creates a powerful value proposition for clients: – Expands SSGA’s alternatives capabilities while enhancing our active equity and fixed
Slide 17: Updated 2016 Outlook
Updated 2016 Outlook1: We continue to have the objective of generating positive fee operating leverage2 for 2016 relative to 2015, excluding the contributions of GEAM • Expect modest operating-basis fee revenue growth for full year 2016 compared to full year 2015 under current market conditions in J
Slide 18: Appendix
Appendix State Street Beacon 19 Footnotes to Slides 5, 6, 15 & 17 20-22 Definition of Metrics 23-24 Non-GAAP Measures, Regulatory Capital Ratios and 25-26 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 $140M in
Slide 20: Footnotes to Slides 5, 6 & 17
Footnote to Slides 5, 6,15 & 17 20
Slide 21: Footnotes to slides 5 & 6
Footnotes to slides 5 & 6 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 re
Slide 22: Footnotes to slides 15 & 17
Footnotes to slide 15 & 17 Footnotes to slide 15: 1 Unless otherwise specified, all capital ratios referenced on slide 15 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 23: Definition of Metrics
Definition of Metrics STATE STREET. 23
Slide 24: 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 25: Non-GAAP Measures, Regulatory Capital Ratios and Reconciliations
Non-GAAP Measures, Regulatory Capital Ratios and Reconciliations 25
Slide 26: 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