State Street Corporation · NYSE:STT
State Street — Q4 2019 Earnings Presentation
22 slides from State Street's earnings presentation, Feb 20, 2020
Slide 1: 4Q 2019 Financial Highlights
4Q 2019 Financial Highlights February 20, 2020 (updated) (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 financial results for the fourth-quarter and full-year ended December 31, 2019, included in State Street's updated Financial Information Addendum dat
Slide 3: 4Q19 & FY2019 highlights
4Q19 & FY2019 highlights All comparisons are to corresponding prior year periods unless noted otherwise 4Q19 FY2019 • Total revenue of $11.8B, down (3)% YoY • Total revenue of $3.0B, up 1% YoY and 5% primarily driven by challenging industry QoQA conditions, lower U.S. market interest rates Financial
Slide 4: 4Q19 notable items
4Q19 notable items QuartersA ($M, except EPS data) 4Q18 4Q19 Repositioning costs: Repositioning costs of $110M • Compensation & employee benefits cost of $98M associated Compensation & employee benefits $(198) $(98) with automation of processes and IT optimization enabling Occupancy (25) (12) workfo
Slide 5: Summary of 4Q19 and FY2019 results
Summary of 4Q19 and FY2019 results Quarters6 %∆ Full Year ($M, except EPS data, or w here otherw ise noted) 4Q18 3Q19 4Q19 4Q18 3Q19 2018 2019 %∆ Revenue: Servicing fees $1,286 $1,272 $1,299 1% 2% $5,421 $5,074 (6)% Management fees 440 445 465 6 4 1,851 1,771 (4) Foreign exchange trading services 29
Slide 6: AUC/A and AUM levels reflect higher end of period market levels and client net inflows
AUC/A and AUM levels reflect higher end of period market levels and client net inflows AUC/A and AUMA Market indices7 AUC/A ($T, as of period-end) 4Q19 vs +4% • 9% increase from 4Q18 primarily (% change) driven by: 4Q18 3Q19 +9% – Higher end of period equity and EOP 29% 9% $34.4 fixed income levels
Slide 7: Revenue: Servicing fee performance reflects stronger markets, new business growth and moderating fee pressure
Revenue: Servicing fee performance reflects stronger markets, new business growth and moderating fee pressure Servicing fees 4Q19 performance ($M) Total revenue: Servicing fees of $1,299M up 1% YoY and 2% QoQ YoY +1% GAAP $3,023 $2,932 $2,873 $2,903 $3,048 QoQ +5% • Up 1% YoY and 2% QoQ primarily dr
Slide 8: Revenue: Management, Markets, Software and processing fee revenue impacted by seasonal activity
Revenue: Management, Markets, Software and processing fee revenue impacted by seasonal activity, stronger markets and FX volatility Management, Markets, Software and processing fee 4Q19 performance revenue ($M) A Management, Markets, Software and processing fee Total revenue of $1,069M up 3% YoY and
Slide 9: CRD financial performance driven by seasonal activity and new bookings
CRD financial performance driven by seasonal activity and new bookings Quarterly metrics ($M) Full year metrics ($M) Standalone CRD revenue11 Standalone CRD revenue +48% ~+8% +4% $401 $126 $372 $121 $99 $91 $85 4Q18 1Q19 2Q19 3Q19 4Q19 FY2018 FY2019 (Proforma)3 Pre-tax Pre-tax 3 income $82 $58 $45 $
Slide 10: Revenue: NII stabilized as higher deposit balances offset lower U.S. market rates
Revenue: NII stabilized as higher deposit balances offset lower U.S. market rates NII and NIMA 4Q19 performance ($M) Total $3,023 $3,048 NII of $636M down (9)% YoY and (1)% QoQ revenue $2,903 • Down (9)% YoY primarily due to: Servicing fees – Lower market rates and mix shift from non-interest bearin
Slide 11: Expenses ex-notable items flat QoQ as savings offset technology infrastructure costs and CRD expansion
Expenses ex-notable items flat QoQ as savings offset technology infrastructure costs and CRD expansion Non-GAAP ex-notable itemsA Expenses (ex-notable items) 4Q19 YoY: Expenses ex-notable items down (2)% ($M) • Compensation and benefits down (5)% YoY primarily driven by savings Flat from resource di
Slide 12: Investment portfolio & capital ratios
Investment portfolio & capital ratios Investment portfolio highlights Quarter-end capital ratios ($B, book value and portfolio metrics as of quarter-end) (%, as of period-end) Capital Ratios15,16 $93.2 $95.1 11.7% 12.1% 12.2% 11.7% 11.7% 11.3% $87.4 16% 16% Non-HQLA 19% 4Q18 3Q19 4Q19 CET1 (Std.) CE
Slide 13: FY2020 Outlook
FY2020 Outlook FY2019 review FY2020 outlook • FY equity market daily averages: S&P 500 up 6%; • Slow global growth 7 Operating MSCI EAFE down (4)%; MSCI EM down (5)% • Current forward rate curve environment • Three Fed Fund Rate cuts • Modest uplift from equity markets • Average 10Y US Treasury rate
Slide 14: Summary
Summary FY2019 results reflect swift management actions to turnaround financial performance • Improved 2H19 fee revenue as a result of management actions and moderating fee pressure – Servicing fees up 2% QoQ in 4Q19 reflecting stronger markets, new business growth and moderating fee pressure • Navi
Slide 15: Appendix
Appendix Medium-term financial targets 16 Reconciliation of notable items 17 Endnotes 18 – 19 Forward-looking statements 20 Non-GAAP measures 21 Definitions 22 15
Slide 16: Medium-term financial targets
Medium-term financial targets A Our strategic priorities will deliver growth, drive innovation and enhance shareholder value Revenue growth 4–5% with CRD Pre-tax margin Further improve by an additional 2%pts EPS growth 10–15% ROE 12–15% Capital return Targeting total payout ratio greater than or equ
Slide 17: Reconciliation of notable items
Reconciliation of notable items Quarterly reconciliation6 (Dollars in millions) 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 Total revenue, GAAP-basis 3,056 3,063 2,989 3,023 2,932 2,873 2,903 3,048 Add: Legal and related 8 Less: Other income (44) Total revenue, excluding notable items 3,056 3,063 2,989
Slide 18: Endnotes
Endnotes 1. New asset servicing mandates, including announced front-to-back investment servicing clients, may be subject to completion of definitive agreements, approval of applicable boards and shareholders and customary regulatory approvals. New asset servicing mandates and servicing assets remain
Slide 19: Endnotes
Endnotes 11. For 4Q19, CRD standalone results include revenue of $126M, operating expenses of $58M and pre-tax income of $68M, which includes $5M of revenue associated with affiliates, including SSGA, that is eliminated in consolidation for financial reporting purposes. On a consolidated basis, CRD
Slide 20: 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 21: 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 certain financial information on a basis that excludes or adjusts one or more items from GAAP. This latter basis is a non-G
Slide 22: Definitions
Definitions AUC/A Assets under custody and/or administration AUM Assets under management Barclays Agg Barclays Agg represents Barclays Global Aggregate Bond Index Bps Basis points, with one basis point representing one hundredth of one percent CCAR Comprehensive Capital Analysis and Review CET1 Comm