State Street Corporation · NYSE:STT
State Street — Barclays Annual Financial Services Conference 2017
34 slides from State Street's conference presentation, Sep 12, 2017
Slide 1: Building on our Strategy to Drive Sustainable Growth and Returns
Building on our Strategy to Drive Sustainable Growth and Returns Barclays Annual Financial Services Conference Eric W. Aboaf Chief Financial Officer Tuesday, September 12, 2017 0
Slide 2: Preface and forward-looking statements
Preface and forward-looking statements This presentation contains forward-looking statements. These statements are not guarantees of future performance, are inherently uncertain, are based on assumptions that are difficult to predict and have a number of risks and uncertainties. The forward-looking
Slide 3: Executive Summary
Executive Summary We have a broad-based franchise with a strong global footprint Well positioned for changing industry landscape and leading market positions support continued business growth opportunity Significant opportunity to expand our client base and deepen relationships Strong first half of
Slide 4: Our focused franchise
Our focused franchise Primary focus of today’s discussion • AUCA of approximately $31 trillion as of June 30, 2017 Providing customized asset • One of the world’s leading investment service providers servicing solutions that support • Fund accounting and administration, custody, investment operation
Slide 5: State Street is a broad-based franchise with a strong global footprint
State Street is a broad-based franchise with a strong global footprint Alternative Asset Insurance Official Asset Asset Managers Companies Institutions Owners Managers AUCA of $31.0T mix as of June 30, 2017 $ in trillions By Geographic By Product By Financial Location Classification Instrument Colle
Slide 6: We are well positioned for a changing industry landscape
We are well positioned for a changing industry landscape Industry Trends: Examples: DC Expansion and • Defined Benefits (DB) to Defined Contribution (DC) and Retail shifts due to demographics (e.g., DC to IRA) driving DB Contraction new flows and requiring added tools and capabilities • Frozen DB pl
Slide 7: Our leading market positions support continued business growth opportunity
Our leading market positions support continued business growth opportunity Industry Trends: Global estimated ETFs1 Alternative DC Expansion and DB Contraction Industry: ~$4T Investments2 Industry: ~$9T STT, Strong ETF 54% Growth Globally #1 in Servicing #1 in Hedge Funds #1 in Real Estate STT, #2 in
Slide 8: We see significant opportunities to expand our client base and relationships
We see significant opportunities to expand our client base and relationships Penetration of top 100 companies for mutual • Targeting the right new clients: Industry Trends: funds, insurance, pension funds and alternatives1: − Focusing on identifying the next DC Expansion and generation of industry l
Slide 9: Our suite of back to front office services and the expansion of outsourcing
Our suite of back to front office services and the expansion of outsourcing also enable us to deepen client relationships Industry Trends: Our integrated solutions support the investment management value chain including: DC Expansion and DB Contraction State Street State Street Global Services1 Glob
Slide 10: Although we are focused on growth, we are also actively measuring and managing margins
Although we are focused on growth, we are also actively measuring and managing margins and returns State Street Client Return on Capital (ROC) and Net Income Before Tax Industry Trends: (NIBT) Margin Framework: % DC Expansion and DB Contraction Client NIBT Margin Strong ETF Growth Globally C Review
Slide 11: Growth in AUCA has been strong and accelerated in the last six quarters
Growth in AUCA has been strong and accelerated in the last six quarters AUCA $ in trillions as of period-end % YoY growth 1H17 vs 1H16 Highlights: 35 25% • AUCA growth reflects: 30 31.0 20% − Growth from market appreciation 29.2 29.8 27.8 28.8 − New business across a breadth of products, 25 26.9 15%
Slide 12: Continued business momentum in the first half of 2017 has delivered strong fee revenue growth
Continued business momentum in the first half of 2017 has delivered strong fee revenue growth Operating-Basis (Non-GAAP)1 Fee Revenue $ in millions % Fee revenue YoY growth 1H17 vs 1H16 Highlights: 2,500 15% 2,268 2,324 • 10% fee revenue growth due to strong 2,213 2,200 business momentum: 2,250 10%
Slide 13: Higher NII & NIM primarily driven by higher U.S. market interest rates
Higher NII & NIM primarily driven by higher U.S. market interest rates and disciplined liability management Operating-Basis (Non-GAAP)1 NII1 1H17 vs 1H16 Highlights: $ in millions % YoY growth • Strengthening NII primarily reflecting: 700 25% − Higher U.S. market interest rates in 600 20% conjunctio
Slide 14: Careful pacing of investments and expense discipline helped generate positive operating leverage
Careful pacing of investments and expense discipline helped generate positive operating leverage in 1H17 Operating-Basis (Non-GAAP) Expenses $ in Millions % YoY growth 2,500 20% 1H17 vs 1H16 Highlights: 2,143 18% 2,057 1,943 1,909 1,960 • Carefully managing expenses and Beacon 2,000 1,828 249 15% 1,
Slide 15: 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, Driving Fund Accounting, scale of Beacon Op
Slide 16: Strong first half of 2017 resulting in 18% EPS growth and ROE of 12%
Strong first half of 2017 driven by broad-based performance, resulting in 18% EPS growth and ROE of 12% Operating-Basis (Non-GAAP)1,2 Diluted Earnings per Share (EPS) $ % YoY growth 1H17 vs 1H16 Highlights: 2.00 30% • EPS growth of 18% driven by strong fee 1.60 1.67 20% revenue and NII growth from h
Slide 17: We are focused on both sustainable growth and returns
We are focused on both sustainable growth and returns Drive growth from the core franchise Advance our digital leadership through Beacon Continue to invest in new products and solutions Achieve our financial goals 16
Slide 18: Questions and Answers
Building on our Strategy to Drive Sustainable Growth and Returns Questions Barclays Annual Financial Services Conference and Eric W. Aboaf Answers Chief Financial Officer Tuesday, September 12, 2017 17
Slide 19: Appendix
APPENDIX Slide footnotes 19 – 20 Forward looking statements 21 Reconciliations of Operating-Basis (Non-GAAP) Financial Information 22 – 31 Definitions 32 – 32 18
Slide 20: Slide footnotes
Slide footnotes Footnote to slide 3: 1 AUM reflects approximately $34 billion (as of June 30, 2017) with respect to which State Street Global Markets, LLC (SSGM) serves as marketing agent; SSGM and State Street Global Advisors (SSGA) are affiliated. Footnotes to slide 5: 1 Morningstar Direct. 2 BCG
Slide 21: Slide footnotes
Slide footnotes Footnotes to slide 11: 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 U.K.), reflecting a change in our oper
Slide 22: Forward-looking statements
Forward-looking statements This presentation contains “forward-looking statements”, including statements about our goals and expectations regarding our business, financial and capital condition, results of operations, strategies, financial portfolio performance, dividend and stock purchase programs,
Slide 23: Reconciliation of operating-basis (non-GAAP) financial information
Reconciliation of operating-basis (non-GAAP) financial information State Street Corporation Reconciliation of Operating-Basis (Non-GAAP) Financial Information In addition to presenting State Street’s financial results in conformity with U.S. generally accepted accounting principles, or GAAP, managem
Slide 24: Reconciliation of operating-basis (non-GAAP) financial information
Reconciliation of operating-basis (non-GAAP) financial information S t a t e S t re e t C o rpo ra t io n R e c o nc ilia t io n o f O pe ra t ing- B a s is ( N o n- G A A P ) F ina nc ia l Inf o rm a t io n Quarters (Do llars in millio ns, except per share amo unts, o r where o therwise no ted) 1Q1
Slide 25: Reconciliation of operating-basis (non-GAAP) financial information
Reconciliation of operating-basis (non-GAAP) financial information S t a t e S t re e t C o rpo ra t io n R e c o nc ilia t io n o f O pe ra t ing- B a s is ( N o n- G A A P ) F ina nc ia l Inf o rm a t io n Quarters % Change 1Q16 2Q17 1H16 2H16 vs. vs. vs. vs. 1Q15 2Q16 1H15 1H16 1H15 2H15 2H16 2H1
Slide 26: Reconciliation of operating-basis (non-GAAP) financial information
Reconciliation of operating-basis (non-GAAP) financial information S t a t e S t re e t C o rpo ra t io n R e c o nc ilia t io n o f O pe ra t ing- B a s is ( N o n- G A A P ) F ina nc ia l Inf o rm a t io n 1H17 vs. 1H16 1H17 1H16 F e e R e v e nue ( 1 ) ( 3 ) : To tal fee revenue, GA A P -basis $
Slide 27: Reconciliation of operating-basis (non-GAAP) financial information
Reconciliation of operating-basis (non-GAAP) financial information S t a t e S t re e t C o rpo ra t io n R e c o nc ilia t io n o f O pe ra t ing- B a s is ( N o n- G A A P ) F ina nc ia l Inf o rm a t io n Quarters % Change 1Q16 2Q17 vs. vs. 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 1Q15 2
Slide 28: Reconciliation of operating-basis (non-GAAP) financial information
Reconciliation of operating-basis (non-GAAP) financial information S t a t e S t re e t C o rpo ra t io n R e c o nc ilia t io n o f O pe ra t ing- B a s is ( N o n- G A A P ) F ina nc ia l Inf o rm a t io n Quarters % Change 1Q16 2Q17 vs. vs. 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 1Q15 2
Slide 29: Reconciliation of operating-basis (non-GAAP) financial information
Reconciliation of operating-basis (non-GAAP) financial information S t a t e S t re e t C o rpo ra t io n R e c o nc ilia t io n o f O pe ra t ing- B a s is ( N o n- G A A P ) F ina nc ia l Inf o rm a t io n Quarters % Change 1Q16 2Q17 vs. vs. 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 1Q15 2
Slide 30: Reconciliation of operating-basis (non-GAAP) financial information
Reconciliation of operating-basis (non-GAAP) financial information State Street Corporation Reconciliation of Operating-Basis (Non-GAAP) Financial Information Quarters % Change 1Q16 2Q17 vs. vs. 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 1Q15 2Q16 Return on Average Common Equity ( 1) ( 2 ) :
Slide 31: Reconciliation of operating-basis (non-GAAP) financial information
Reconciliation of operating-basis (non-GAAP) financial information S t a t e S t re e t C o rpo ra t io n R e c o nc ilia t io n o f O pe ra t ing- B a s is ( N o n- G A A P ) F ina nc ia l Inf o rm a t io n 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 F e e O pe ra t ing Le v e ra ge , G A A P
Slide 32: Reconciliation of operating-basis (non-GAAP) financial information
Reconciliation of operating-basis (non-GAAP) financial information S t a t e S t re e t C o rpo ra t io n R e c o nc ilia t io n o f O pe ra t ing- B a s is ( N o n- G A A P ) F ina nc ia l Inf o rm a t io n 4Q15 4Q16 F e e O pe ra t ing Le v e ra ge , O pe ra t ing- B a s is ( 1 ) : To tal fee reve
Slide 33: Definitions
Definitions AIFMD Alternative Investment Fund Managers Directive AUCA Assets under custody and administration AUM Assets under management Multi-year transformational effort with an objective to deliver best-in-class service and solutions, end-to-end service delivery, agile Beacon methodologies, clie
Slide 34: Definitions
Definitions GAAP Generally Accepted Accounting Principles GE Asset Management (GEAM) The acquired GE Asset Management operations GLD SPDR gold shares is part of the SPDR family of ETFs, where SSGA act as the marketing agent IRA Individual retirement account M&A Mergers & acquisition MiFID II Markets
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