State Street Corporation · NYSE:STT
State Street — Q4 2012 Earnings Presentation
25 slides from State Street's earnings presentation, Jan 18, 2013
Slide 1: State Street Corporation Fourth Quarter 2012 Financial Highlights
LIMITED ACCESS State Street Corporation Fourth Quarter 2012 Financial Highlights January 18, 2013 Exhibit 99.3
Slide 2: Forward-Looking Statements
2 Forward-Looking Statements This presentation contains forward-looking statements as defined by United States securities laws, including statements relating to our goals and expectations regarding our business, financial condition, (including without limitation, our capital ratios under Basel III),
Slide 3: Fourth-Quarter 2012 Financial Highlights
3 • GAAP-basis EPS of $1.00 compared to $1.36 in Q3 ’12; up 32% from Q4 ’11 • GAAP-basis revenue increased 4% to $2.45 billion from Q3 ’12; up 6% from Q4 ’11 • Operating-basis(1) EPS of $1.11 increased 12% from Q3 ’12; up 19% from Q4 ’11 • Achieved positive operating leverage(2) of 20 bps vs. Q3 ’12
Slide 4: Fourth-Quarter 2012 Financial Highlights (Continued)
4 Fourth-Quarter 2012 Financial Highlights(1) (Continued) • Market-driven revenues – Foreign-exchange revenue increased 2.6% from third quarter of 2012 due to higher revenue from direct foreign- exchange trading, partially offset by lower volatility – Securities finance declined 18.7% from third qua
Slide 5: Fourth-Quarter 2012 Financial Highlights (Continued)
5 Fourth-Quarter 2012 Financial Highlights(1) (Continued) • Strong capital position – Returned capital to shareholders through common stock purchases and dividends – Purchased 10.9 million shares of common stock in the fourth quarter at an average price of $43.99 for $480 million under current $1.8
Slide 6: Summary of Fourth-Quarter GAAP-Basis 2012 Financial Results
6 Summary of Fourth-Quarter GAAP-Basis 2012 Financial Results $ in millions, except per share data Q4'12 Q3'12 Q4'11 vs Q3'12 vs Q4'11 Revenue 2,449$ 2,356$ 2,315$ 3.9 % 5.8 % Expenses 1,864$ 1,415$ 1,784$ 31.7 % 4.5 % EPS 1.00$ 1.36$ 0.76$ (26.5)% 31.6 % ROE 9.3% 13.3 % 7.8 % Average diluted shares
Slide 7: Summary of Full-Year 2012 GAAP-Basis Financial Results
7 Summary of Full-Year 2012 GAAP-Basis Financial Results $ in millions, except per share data 2012 2011 % change Revenue 9,649$ 9,594$ 0.6 % Expenses 6,886$ 7,058$ (2.4)% EPS 4.20$ 3.79$ 10.8 % ROE 10.3% 10.0% Average diluted shares outstanding 481.1 496.1
Slide 8: Summary of Fourth-Quarter 2012 Operating-Basis (Non-GAAP) Financial Results
8 Summary of Fourth-Quarter 2012 Operating-Basis (Non-GAAP) Financial Results(1) (1) Results presented on an operating basis, a non-GAAP presentation. Refer to the addendum included with this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-ba
Slide 9: Summary of Full-Year 2012 Operating-Basis (Non-GAAP) Financial Results
9 Summary of Full-Year 2012 Operating-Basis (Non-GAAP) Financial Results(1) (1) Results presented on an operating basis, a non-GAAP presentation. Refer to the addendum included with this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis f
Slide 10: Operating-Basis (Non-GAAP) Revenue
10 Operating-Basis (Non-GAAP) Revenue(1) (1) Results presented on an operating basis, a non-GAAP presentation. Refer to the addendum included with this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financial information. Key Drivers •
Slide 11: Operating-Basis (Non-GAAP) Expenses
11 Operating-Basis (Non-GAAP) Expenses(1) Key Drivers • Compensation and employee benefits flat sequentially; up from Q4 ’11 primarily due to higher overall compensation and benefits costs, expenses added by the acquired GSAS business, partially offset by savings from Business Operations and IT Tran
Slide 12: Balance Sheet Strategy and Investment Portfolio Highlights
12 Balance Sheet Strategy and Investment Portfolio Highlights Balance Sheet Strategy Guidelines Invest in high quality assets • Invest through the cycle • Solid credit profile: 90% AAA / AA-rated • Diversify by asset class and geography Prudently manage balance sheet within risk appetite • Portfolio
Slide 13: Capital
13 Capital (1) All capital ratios in this presentation refer to State Street Corporation and not State Street Bank and Trust Company. Total risk-based capital, or total capital, tier 1 risk-based capital, or tier 1 capital, and tier 1 leverage ratios are calculated in accordance with currently appli
Slide 14: Outlook for 2013
14 Outlook for 2013 Expectations include: • A challenging market environment – Cautious outlook due to uncertainty related to U.S. budgetary issues and continuing European uncertainty – Equity markets – S&P 500 average to increase approximately 5% above the 2012 daily average – EAFE to increase appr
Slide 15: Addendum
15 ADDENDUM A. Investment Portfolio B. Impact of Tax-Advantaged Investments Tax-Equivalent Adjustment on Operating-Basis (Non-GAAP) Financial Results for the Quarters Ended December 31, 2012, September 30, 2012 and December 31, 2011 C. Non-GAAP Measures and Capital Ratios Pages 16-22 23-24 25
Slide 16: A. Investment Portfolio
B STATE STREET. A. Investment Portfolio
Slide 17: Investment Portfolio as of December 31, 2012
17 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 18: Investment portfolio credit quality and diversification
18 • Assets selected using rigorous credit process • Diversified by asset class and geography • 88.8% AAA / AA-rated • Constructed to perform well through periods of economic weakness • Unrealized after-tax available for sale (AFS) and held to maturity (HTM) mark to market (MTM) gain = $698M(1) Port
Slide 19: Investment portfolio ratings and book value by asset class
19 Ratings(1) Book Value ($B) Book Value (% Total) Unrealized After-tax MTM Gain / (Loss) ($M) Investment UST / AGY AAA AA A BBB <BBB Not Rated Fixed Rate / Floating Rate Government/Agency securities 65% 20% 15% — — — — 9.0 7.5 8 91% / 9% Asset-backed securities — 65% 27% 5% 1% 2% — 53.8 44.7 (84) 5
Slide 20: Asset-backed securities ratings and book value
20 Ratings(1) Book Value ($B) Book Value (% Total) Unrealized After-tax MTM Gain / (Loss) ($M) Investment UST / AGY AAA AA A BBB <BBB Not Rated Student Loans — 27% 69% 3% — 1% — 16.8 31.2 (258) Credit Cards — 98% — 1% 1% — — 11.6 21.6 48 Auto/Equipment — 99% — — — 1% — 4.7 8.7 12 Foreign RMBS — 80%
Slide 21: Mortgage-backed Securities Holdings as of December 31, 2012
21 Ratings(1) Book Value ($B) Book Value (% Total) Unrealized After-tax MTM Gain / (Loss) ($M) Investment UST / AGY AAA AA A BBB <BBB Not Rated Agency MBS 100% — — — — — — 31.7 80.7 366 Non-Agency MBS — 21% 10% 23% 12% 34% — 2.3 5.8 0 CMBS 2% 76% 13% 8% — 1% — 5.3 13.5 103 TOTAL MBS 81% 11% 2% 3% 1%
Slide 22: Non-US Investments by country
22 December 31, 2012 Book Book Value ($ billion) Value Average Gov't/ (1) ABS ABS Corporate Covered ($B) Rating Agency FRMBS All Other Bonds Bonds Other United Kingdom 10.9 AAA - 8.1 2.2 0.4 0.2 - Australia 6.3 AA - 3.1 1.3 0.2 0.4 1.3 Netherlands 2.9 AAA - 2.6 0.2 0.1 - - Canada 2.2 AAA 1.8 - - 0.3
Slide 23: B. Impact of Tax-Advantaged Investments
23 B. Impact of Tax-Advantaged Investments Tax-Equivalent Adjustment on Operating- Basis (Non-GAAP) Financial Results for the Quarters Ended December 31, 2012, September 30, 2012 and December 31, 2011
Slide 24: Tax-Equivalent Adjustment on Operating-Basis Results
24 (1) Results presented on an operating basis, a non-GAAP presentation. Refer to the addendum included with this presentation for explanations of our non-GAAP financial measures and for reconciliations of our operating-basis financial information. (2) Operating leverage is defined as the rate of gr
Slide 25: C. Non-GAAP Measures and Capital Ratios
25 C. 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 Click Here.