Slide 1: Fourth Quarter & Full Year 2017 Financial Highlights
Fourth Quarter & Full Year 2017 Financial Highlights January 23, 2018 (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 news release announcing its fourth quarter and full year 2017 financial results. That news release contains a more detailed discussion of many of the
Slide 3: Summary of Full Year 2017 Results
Summary of Full Year 2017 Results GAAP-basis Financials Operating-basis (non-GAAP) Financials Full Year %∆ Full Year %∆ (Dollars in millions, except per share data, or where otherwise noted) 2016 ex notable 2016 2017 FY A 2017 FY adjustments Revenue: Servicing fees $5,073 $5,365 6% $5,121 $5,365 5%
Slide 4: 4Q17 & FY 2017 Highlights
4Q17 & FY 2017 Highlights Operating-Basis (Non-GAAP); All comparisons are to prior year periods excluding 4Q16 notable adjustments A • Exceeded financial objectives for the year, including revenue growth, fee operating leverage and Beacon results • Record year-end AUCA and AUM levels resulting from
Slide 5: Achieved FY 2017 financial goals across the franchise
Achieved FY 2017 financial goals across the franchise Operating-Basis (Non-GAAP); All comparisons are to 2016 excluding 4Q16 notable adjustments A Fee Revenue Growth Fee Operating Leverage Expense Management Outlook Range* Outlook Range Beacon Savings ($M) 8% +2.0% +2.1% 150 140 6% 7% ex 4% gain on
Slide 6: Strong 4Q17 results
Strong 4Q17 results GAAP-basis Financials Operating-basis (non-GAAP) Financials Tax Cuts & Jobs Act (TCJA) Impact5 (Dollars in millions, except per share data, or where Quarters %∆ Quarters % ∆ 4Q17 (GAAP Impact) otherwise noted) 4Q16 ex vs 4Q16 ex 4Q17 • 4Q17 includes a one-time estimated net 4Q16
Slide 7: Generated strong 4Q17 and FY 2017 earnings growth
Generated strong 4Q17 and FY 2017 earnings growth as well as improved return on equity Operating-Basis (Non-GAAP)1,2; All comparisons are to prior year periods excluding 4Q16 notable adjustments A Diluted EPS ROE ($) (%) +25% +2.1%pts +2.7%pts 6.41 13.7 13.4 14.1 12.9 +36% 5.14 11.4 10.8 10.4 1.71 1
Slide 8: 4Q17 AUCA and AUM growth driven by market appreciation
4Q17 AUCA and AUM growth driven by market appreciation and client momentum Assets Under Custody Assets Under and Administration (AUCA) Management (AUM) $ in trillions, as of period-end $ in billions, as of period-end +15% +13% +3% +4% 32.1 33.1 2,673 2,782 29.8 31.0 2,468 2,561 2,606 28.8 4Q16 1Q17
Slide 9: Continued fee revenue growth driven by higher equity markets
Continued fee revenue growth driven by higher equity markets and new business activity Operating-Basis (Non-GAAP)1 Fee Revenue 4Q17 vs 4Q16 ($M) +6% • Servicing fees increased mainly due to higher global +4% ex FX equity markets, new business, and the impact of the 2,268 2,324 2,321 2,326 weaker U.S
Slide 10: Higher U.S. market interest rates and disciplined balance sheet management
Higher U.S. market interest rates and disciplined balance sheet management resulted in higher NII and NIM Operating-Basis (Non-GAAP) 2 NII & NIM 4Q17 vs 4Q16 (NII $M, NIM %) NII +20% NIM +31bps 700 1.80 • NII increased primarily due to higher U.S. market interest 645 658 rates, disciplined liability
Slide 11: Expenses continue to support new business and client activity
Expenses continue to support new business and client activity offset by savings from Beacon Operating-Basis (Non-GAAP); 4Q17 prior year comparison to 4Q16 exclude notable adjustments A B Expenses 4Q17 vs 4Q16 ($M) +5% • Compensation and employee benefits increased +4% ex FX primarily driven by incre
Slide 12: Expect Beacon savings to be realized ahead of plan
Expect Beacon savings to be realized 18 months ahead of plan by mid-2019 with enhancements to client experience Operating-Basis (Non-GAAP) Select Key Achievements Financial Impact • Differentiated client service: Accelerated daily net asset value (NAV) delivery by 20-30 minutes, on average, for 200+
Slide 13: Continuing to maintain a high-quality balance sheet
Continuing to maintain a high-quality balance sheet and increase capital ratios while delivering strong capital returns 8 4Q17 Investment Portfolio Highlights Quarter-End Capital Positions as of December 31, 2017 %, as of period-end Investment Portfolio: Capital Ratios: 4Q16 1Q17 2Q17 3Q17 4Q17 • Si
Slide 14: Introducing streamlined financial presentation and certain new standards in 2018
Introducing streamlined financial presentation and certain new standards in 2018 TCJA & Revenue Recognition Changes: 5 TCJA Revenue recognition • Anticipate a 2018 GAAP tax rate of approximately • The new revenue recognition accounting rule is not 15-17% expected to impact the amount of 2018 EBIT St
Slide 15: 2018 Full Year Outlook
2018 Full Year Outlook 2018 Historical 2018 GAAP Category Operating-basis OutlookA (2018 vs 2017 OutlookA Including TCJA5 & Assumptions Excluding TCJA5, Revenue Revenue Recognition where applicable) Recognition, Gain on Sales, Excluding Gain on Sales & & Restructuring Charges Restructuring Charges F
Slide 16: Full Year Summary and 2018 Opportunities
Full Year Summary and 2018 Opportunities Operating-Basis (Non-GAAP); All comparisons are to prior year periods excluding 4Q16 notable adjustments A Strong 2017 operating results demonstrate franchise-wide momentum • Revenue growth and positive operating leverage – Strong client activity across the f
Slide 17: APPENDIX
APPENDIX FY 2017 vs FY 2016 Variances for Fee Revenue, NII and Expenses 18 FY 2018 Outlook 19 4Q17 GAAP & Operating-basis (non-GAAP) Results 20 4Q17 vs 3Q17 Variances for Fee Revenue, NII and Expenses 21 - 23 Slide Endnotes 24 Forward Looking Statements 25 Non-GAAP Measures 26 Definitions 27 17
Slide 18: Strong FY 2017 earnings results reflected revenue growth
Strong FY 2017 earnings results reflected revenue growth and better expense management through Beacon $M; Operating-Basis (Non-GAAP); All comparisons are to prior year periods excluding 4Q16 notable adjustments A 1 2 Fee Revenue NII & NIM Expenses +8% NIM% +6% +7% ex FX NII +14% +6% ex FX NIM +20bps
Slide 19: 2018 Full Year Outlook
2018 Full Year Outlook 2018 Historical Adjustments 2018 GAAP 2018 GAAP Category Operating-basis B B GAAP Outlook Outlook B (2018 vs 2017 Outlook Excluding TCJA 5 , Revenue Revenue A 5 Excluding TCJA , Revenue Adjustments i TCJA 5 Excluding Gain on Sales where applicable ) Recognition, Gain on Sales,
Slide 20: Summary of 4Q17 Results
Summary of 4Q17 Results GAAP-basis Financials Operating-basis (non-GAAP) Financials Quarters %∆ Quarters %∆ (Dollars in millions, except per share data, or where otherwise noted) 4Q16 ex 4Q16 ex 4Q16 3Q17 4Q17 3Q17 4Q16 notable 3Q17 4Q17 3Q17 notable A adjustments items Revenue: Servicing fees $1,28
Slide 21: 4Q17 fee revenue in line with 3Q17
4Q17 fee revenue in line with 3Q17 as higher equity markets and net new business offset weaker trading Operating-Basis (Non-GAAP)1 Fee Revenue 4Q17 vs 3Q17 ($M) 0% 0% ex FX • Servicing fees increased primarily due to higher global equity markets and new business 2,268 2,324 2,321 2,326 • Management
Slide 22: Central bank rate hikes and higher yielding asset mix
Central bank rate hikes and higher yielding asset mix resulted in higher NII and NIM Operating-Basis (Non-GAAP) 2 NII & NIM 4Q17 vs 3Q17 (NII $M, NIM %) NII +2% NIM +4bps • NII increased primarily due to central bank rate hikes and 700 658 1.80 a shift toward higher yielding interest earning assets,
Slide 23: Expenses continue to support new business and client activity
Expenses continue to support new business and client activity offset by savings from Beacon Operating-Basis (Non-GAAP); 4Q17 prior year comparison to 4Q16 exclude notable adjustments A B Expenses 4Q17 vs 3Q17 ($M) +1% 0% ex FX • Compensation and employee benefits decreased primarily due to savings f
Slide 24: Slide Endnotes
Slide Endnotes 1 In 2017, operating basis results reflect gains/losses on sales of businesses. The first and third quarters of 2017 operating-basis results included a pre-tax gain of approximately $30 million on the sale of our transfer agency joint venture interests and a pre-tax gain of approximat
Slide 25: Forward-looking statements
Forward-looking statements This presentation (and the conference call referenced herein) 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
Slide 26: 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 has also historically (and in this presentation) presented results on a non-GAAP, or "operating," basis. Management believed this present
Slide 27: Definitions
Definitions Available-for-sale (AFS) Security that is purchased with the ability of selling before it reaches maturity AUCA Assets under custody and administration AUM Assets under management BEAT Base Erosion Anti-abuse Tax Bps Basis points Our core tax rate is intended to reflect our structural ta