State Street Corporation · NYSE:STT
State Street — Q2 2014 Earnings Presentation
26 slides from State Street's earnings presentation, Jul 22, 2014
Slide 1: State Street Corporation Second-Quarter 2014 Financial Highlights
LIMITED ACCESS State Street Corporation Second-Quarter 2014 Financial Highlights July 22, 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 second- quarter 2014 financial results. That news release contains a more detailed discussion of many of the matters described in this presen
Slide 3: Second-Quarter 2014 Financial Highlights
3 • GAAP-basis earnings per share, or EPS, of $1.38 increased from $0.81 in Q1 ’14 and from $1.24 in Q2 ’13 – Q1 ’14 EPS reflects $146 million, or $.23 per share, related to seasonal deferred incentive compensation expense for retirement-eligible employees and payroll taxes • Total GAAP-basis revenu
Slide 4: Summary of GAAP-Basis Financial Results for the Six Months Ended June 30, 2014
4 Summary of GAAP-Basis Financial Results for the Six Months Ended June 30, 2014 $ in millions, except per share data 2014 2013 % change Revenue 5,083$ 4,995$ 1.8% Expenses 3,878 3,624 7.0 Earnings per share (EPS) 2.19 2.22 (1.4) Return on average common equity (ROE) 9.6% 10.2% Pre-tax operating mar
Slide 5: Summary of GAAP-Basis Financial Results for the Second Quarter of 2014
5 Summary of GAAP-Basis Financial Results for the Second Quarter of 2014 $ in millions, except per share data Q2 '14 Q1 '14 Q2 '13 Q1 '14 Q2 '13 Revenue 2,598$ 2,485$ 2,560$ 4.5% 1.5% Expenses 1,850 2,028 1,798 (8.8) 2.9 EPS 1.38 .81 1.24 70.4 11.3 ROE 11.9% 7.2% 11.3% Pre-tax operating margin 28.7
Slide 6: Second-Quarter 2014 GAAP-Basis Revenue
6 Second-Quarter 2014 GAAP-Basis Revenue $ in millions Q2 '14 Q1 '14 Q2 '13 Servicing fees 1,288$ 4.0% 7.2% Management fees 300 2.7 8.3 Trading services revenue 260 2.8 (14.5) Securities finance revenue 147 72.9 12.2 Processing fees and other revenue 44 (21.4) (24.1) Total fee revenue 2,039 6.0 3.5
Slide 7: Second-Quarter 2014 GAAP-Basis Expenses
7 Second-Quarter 2014 GAAP-Basis Expenses $ in millions Q2 '14 Q1 '14 Q2 '13 Compensation and employee benefits 978$ (15.5)% 6.7% Information systems and communications 244 - 3.8 Transaction processing services 193 1.0 3.8 Occupancy 115 0.9 0.9 Acqui ition and restructuring costs 28 (15.2) (6.7) Oth
Slide 8: Strong Q2 '14 operating-basis EPS driven by fee revenue growth
8 • Strong Q2 ’14 operating-basis EPS driven primarily by improved fee revenue growth • Higher servicing fees compared to Q2 ’13 due to stronger global equity markets, net new business, and the impact of the weaker U.S. dollar • Higher management fees compared to Q1 ’14 and Q2 ’13 driven primarily b
Slide 9: Year-to-Date and Second-Quarter 2014 Operating-Basis Financial Highlights
9 Year-to-Date and Second-Quarter 2014 Operating-Basis Financial Highlights1 • Year-to-date (six months ended June 30, 2014) key financial metrics – EPS of $2.37 for the six months ended June 30, 2014 increased 7.7% from the same period in 2013 – Total revenue of $5.24 billion for the six months end
Slide 10: Summary of Operating-Basis (Non-GAAP) Financial Results for the Six Months Ended June 30, 2014
10 Summary of Operating-Basis (Non-GAAP) Financial Results1 for the Six Months Ended June 30, 2014 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
Slide 11: Summary of Operating-Basis (Non-GAAP) Financial Results for the Second-Quarter of 2014
11 Summary of Operating-Basis (Non-GAAP) Financial Results1 for the Second-Quarter of 2014 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 operatin
Slide 12: Operating-Basis (Non-GAAP) Revenue
12 Operating-Basis (Non-GAAP) Revenue1 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 financial information. Key
Slide 13: Operating-Basis (Non-GAAP) Expenses
13 Operating-Basis (Non-GAAP) Expenses1 Key Drivers • Q2 ’14 compensation and employee benefits expenses decreased 10.2% compared to Q1 ’14, primarily due to an incremental $146 million associated with the seasonal deferred incentive compensation expense for retirement- eligible employees and payrol
Slide 14: Balance Sheet Highlights
14 Balance Sheet Highlights Second-Quarter 20141, 2 Investment portfolio • Size: $117 billion, unchanged from end of Q1 ’14 • Credit profile: approximately 89% rated AAA/AA • Fixed-rate/floating-rate mix: 46% / 54% • Duration: 1.9 years • Unrealized after-tax mark-to-market (MTM) gain improved to $4
Slide 15: Capital: Second-Quarter 2014 Highlights
15 Capital Footnotes 1 through 7 provided on page 16. Second-Quarter 2014 Highlights • Maintained a strong capital position • In Q2 ’14, purchased approximately 6.3 million shares of our common stock, at an average price of $65.02 per share and a total cost of approximately $410 million, under the M
Slide 16: Capital Footnotes
16 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 17: Appendix
17 APPENDIX A. Effective Tax Rate Calculations B. Investment Portfolio C. Non-GAAP Measures and Capital Ratios Pages 18 19-25 26
Slide 18: Effective Tax Rate Calculations
18 Effective Tax Rate Calculations • Beginning with the first quarter of 2014, we are presenting our operating-basis effective tax rate to reflect the tax-equivalent adjustments associated with our investments in tax-exempt securities, low-income housing and alternative energy • There is no effect o
Slide 19: B. Investment Portfolio
B STATE STREET. B. Investment Portfolio
Slide 20: Investment Portfolio as of June 30, 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 credit quality and diversification
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 $456M 1 Portfolio amounts are expressed at book value; book value in
Slide 22: Investment Portfolio Ratings and Book Value
22 Ratings 1 Book Value ($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 69% 18% 13% — — — — $12.3 10.6% $(120) 94% / 6% Asset-backed securities — 70% 22% 4% 1% 3% — 52.4 4
Slide 23: Asset-Backed Securities Holdings
23 Ratings 1 Book Value ($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% — — — $15.9 30.3% $(11) Credit Cards — 100% — — — — — 9.0 17.2 (1) Auto/Equipment — 99% — — 1% — — 5.5 10.5 6 Non-US RMBS — 83% 6%
Slide 24: Mortgage-backed Securities Holdings as of June 30, 2014
24 Ratings 1 Book Value ($B) Book Value (% Total) Unrealized After-tax MTM Gain / (Loss) ($M) Investment UST / AGY AAA AA A BBB <BBB Not Rated Agency MBS 100% — — — — — — $22.0 72.8% $46 Non-Agency MBS — 42% 5% 12% 13% 28% — 1.9 6.3 19 CMBS 2% 86% 6% 5% — 1% — 6.3 20.9 31 TOTAL MBS 73% 20% 2% 2% 1%
Slide 25: Non-U.S. Investment Summary as of June 30, 2014
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 $9.4 million. (1) Investment Portfolio
Slide 26: C. Non-GAAP Measures and Capital Ratios
26 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 go to www.statestreet.com/stockholder and click on “Filings &