State Street Corporation · NYSE:STT
State Street — Q1 2014 Earnings Presentation
26 slides from State Street's earnings presentation, Apr 25, 2014
Slide 1: First-Quarter 2014 Financial Highlights
LIMITED ACCESS State Street Corporation First-Quarter 2014 Financial Highlights April 25, 2014 Exhibit 99.3
Slide 2: Forward-Looking Statements
2 This presentation includes certain highlights of, and also material supplemental to, State Street Corporation’s (State Street’s) news release announcing its first-quarter 2014 financial results. That news release contains a more detailed discussion of many of the matters described in this presenta
Slide 3: First-Quarter 2014 Financial Summary
3 • GAAP-basis earnings per share, or EPS, of $0.81 decreased from $1.22 in Q4 ’13 and from $0.98 in Q1 ’13 – GAAP-basis EPS for Q1 ’14 reflects pre-tax severance costs of $72 million, or $0.11 per share, related to staff reductions to realign cost base – Compared to Q4 ’13, Q1 ’14 pre-tax expenses
Slide 4: Summary of First-Quarter 2014 GAAP-Basis Financial Results
4 Summary of First-Quarter 2014 GAAP-Basis Financial Results $ in millions, except per share data Q1 '14 Q4 '13 Q1 '13 Q4 '13 Q1 '13 Revenue 2,485$ 2,464$ 2,435$ 0.9% 2.1% Expenses 2,028 1,846 1,826 9.9 11.1 Earnings per share (EPS) .81 1.22 .98 (33.6) (17.3) Return on average common equity (ROE) 7.
Slide 5: GAAP-Basis Revenue
5 GAAP-Basis Revenue $ in millions Q1 '14 Q4 '13 Q1 '13 Servicing fees 1,238$ 0.5% 5.4% Management fees 292 0.7 11.0 Trading services 239 4.8 (14.9) Securities finance 85 11.8 9.0 Processing fees and other 70 32.1 16.7 Net interest revenue 555 (5.1) (3.6) Gains (losses) related to investment securit
Slide 6: GAAP-Basis Expenses
6 GAAP-Basis Expenses $ in millions Q1 '14 Q4 '13 Q1 '13 Compensation and employee benefits 1,157$ 22.4% 11.8% Information systems and communications 244 7.0 3.0 Transaction processing services 191 4.9 6.1 Occupancy 114 (8.1) (1.7) Acquisition and restructuring costs 33 10.0 135.7 Other 289 (14.2) 1
Slide 7: GAAP-Basis Key Drivers
7 • Higher servicing fees relative to Q1 ’13 from stronger global equity markets and net new business, partially offset by conservative client risk-taking behavior and lower transaction-related revenue • Higher management fees primarily due to stronger global equity markets compared to Q1 ’13 • Mark
Slide 8: First-Quarter 2014 Financial Highlights
8 First-Quarter 2014 Financial Highlights1 • Key operating-basis (non-GAAP)1 financial metrics – EPS of $0.99 for Q1 ’14 decreased 13.9% from Q4 ’13 and increased 3.1% from Q1 ’13 – Total revenue of $2.56 billion for Q1 ’14 increased 1.2% from Q4 ’13 and 3.6% from Q1 ’13 – Pre-tax operating margin o
Slide 9: First-Quarter 2014 Financial Highlights (Continued)
9 First-Quarter 2014 Financial Highlights1 (Continued) • Operating-basis (non-GAAP)1 expenses (continued) – Business Operations and Information Technology Transformation program remains on track to deliver additional pre-tax expense savings of approximately $130 million for full-year 20142 – Overall
Slide 10: First-Quarter 2014 Financial Highlights (Continued)
10 First-Quarter 2014 Financial Highlights (Continued) • Strong capital position – Return of capital to shareholders through common stock purchases and dividends remains a priority – Purchased approximately 6.1 million shares of our common stock in Q1 ’14, at an average price of $69.14 per share at
Slide 11: Summary of First-Quarter 2014 Operating-Basis (Non-GAAP) Financial Results
11 Summary of First-Quarter 2014 Operating-Basis (Non-GAAP) Financial Results1 1 Results presented on an operating basis, a non-GAAP presentation. Refer to the addendum linked to this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis fina
Slide 12: Operating-Basis (Non-GAAP) Revenue
12 Operating-Basis (Non-GAAP) Revenue1 nm: Not meaningful. 1 Results presented on an operating basis, a non-GAAP presentation, where applicable. Refer to the addendum linked to this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financ
Slide 13: Operating-Basis (Non-GAAP) Expenses
13 Operating-Basis (Non-GAAP) Expenses1 Key Drivers • Q1 ’14 compensation and employee benefits expenses increased from Q4 ’13, primarily due to an incremental $146 million, or $0.23 per share, associated with the seasonal deferred incentive compensation expense for retirement- eligible employees an
Slide 14: Balance Sheet Highlights First-Quarter 2014
14 Balance Sheet Highlights First-Quarter 20141, 2 Investment portfolio • Size: $117 billion, up slightly from end of Q4 ’13 • Credit profile: approximately 89% rated AAA / AA • Fixed-rate/floating-rate mix: 45% / 55% • Duration: 1.9 years • Unrealized after-tax mark-to-market (MTM) gain: $124 milli
Slide 15: Capital: Returning Capital to Shareholders Remains a Priority
15 Capital Footnotes 1, 2 and 3 provided on page 17. First-Quarter 2014 Highlights • Maintained a strong capital position • In Q1 ’14, completed the final phase of the $2.1 billion common stock purchase program with the purchase of approximately 6.1 million of our common stock at an average price of
Slide 16: Effective Tax Rate Calculations
16 Operating-basis effective tax rate - prior calculation Q1 '14 Q4 '13 Q1 '13 Income before income tax expense, operating-basis 640$ 762$ 658$ Less aggregate tax-equivalent adjustments 101 95 66 Income before income tax expense, excluding tax-equivalent adjustments, operating-basis 539 667 592 Inco
Slide 17: Footnotes
17 1Unless otherwise specified, all capital ratios referenced on page 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. Refer to the addendum linked to this presentation for a further descripti
Slide 18: Appendix
18 APPENDIX A. Investment Portfolio B. Non-GAAP Measures and Capital Ratios Pages 19-25 26
Slide 19: A. Investment Portfolio
B STATE STREET. A. Investment Portfolio
Slide 20: Investment Portfolio as of March 31, 2014
20 Portfolio amounts are expressed at book value; book value includes the amortized cost of transferred securities at the time they were transferred. OECD=Organization for Economic Cooperation and Development FFELP=Federal Family Education Loan Program Government / Agency Structured Securities Unsec
Slide 21: Investment Portfolio characteristics
21 • Assets selected using rigorous credit process • Diversified by asset class and geography • 89% rated AAA / AA • Constructed to perform well through periods of economic weakness • Unrealized after-tax mark-to-market (MTM) gain of $124M 1 Portfolio amounts are expressed at book value; book value
Slide 22: Investment Portfolio ratings and book value
22 Ratings 1 Book Value ($B) Book Value (% Total) Unrealized After-tax MTM Gain / (Loss) ($M) 2 Investment UST / AGY AAA AA A BBB <BBB Not Rated Fixed Rate / Floating Rate Government/Agency securities 66% 18% 16% — — — — $10.7 9.1% $(192) 93% / 7% Asset-backed securities — 70% 22% 4% 1% 3% — 53.9 45
Slide 23: Asset-Backed Securities Holdings
23 Ratings 1 Book Value ($B) Book Value (% Total) Unrealized After-tax MTM Gain / (Loss) ($M) Investment UST / AGY AAA AA A BBB <BBB Not Rated Student Loans — 31% 64% 5% — — — $16.3 30.2% $(43) Credit Cards — 99% 1% — — — — 9.8 18.2 (1) Auto/Equipment — 99% — 1% — — — 5.6 10.4 7 Non-US RMBS — 84% 4%
Slide 24: Mortgage-backed Securities Holdings
24 Ratings 1 Book Value ($B) Book Value (% Total) Unrealized After-tax MTM Gain / (Loss) ($M) Investment UST / AGY AAA AA A BBB <BBB Not Rated Agency MBS 100% — — — — — — $23.1 73.8% $(47) Non-Agency MBS — 41% 5% 13% 13% 28% — 2.0 6.4 7 CMBS 2% 83% 8% 6% 1% — — 6.2 19.8 11 TOTAL MBS 74% 19% 2% 2% 1%
Slide 25: Non-U.S. Investment Summary
25 Non-U.S. Investments: Ratings Non-U.S. Investments: Asset Class 1. Sovereign debt is reflected in the government agency column. 2. Country of collateral used except for corporates, where country of issuer is used. Excludes equity securities of approximately $8.5 million. (1) Investment Portfolio
Slide 26: B. Non-GAAP Measures and Capital Ratios
26 B. Non-GAAP Measures and Capital Ratios Refer to the addendum linked to this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financial information. To access the addendum go to www.statestreet.com/stockholder and click on “Filings &