Slide 1: Third-Quarter 2015 Financial Highlights
State Street Corporation Third-Quarter 2015 Financial Highlights October 23, 2015
Slide 2: Forward-Looking Statements
This presentation includes certain highlights of, and also material supplemental to, State Street Corporation’s (State Street’s) news release announcing its third-quarter 2015 financial results. That news release contains a more detailed discussion of many of the matters described in this presentati
Slide 3: Focused strategy supports long-term financial goals
Focused strategy supports long-term financial goals LONG-TERM SHAREHOLDER VALUE Operating-Basis1 Financial Goals: Revenue Growth of 8%-12%, EPS Growth of 10%-15% and ROE of 12%-15% BUILDING ON ACHIEVING A INVESTING IN OPTIMIZING OUR STRONG DIGITAL OPPORTUNITIES CAPITAL CORE ENTERPRISE FOR GROWTH Ali
Slide 4: Summary of GAAP-Basis Results
Summary of GAAP-Basis Results Quarters % Change Period % Change 3Q15 3Q15 9/30/15 YTD vs vs 9/30/14 9/30/15 vs $ in millions, except per share data 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 3Q14 2Q15 YTD YTD 9/30/14 YTD Revenue $ 2,485 $ 2,598 $ 2,582 $ 2,630 $ 2,605 $ 2,614 $ 2,619 1.4% 0.2% $ 7,665 $ 7,8
Slide 5: GAAP-Basis Revenue
GAAP-Basis Revenue Quarters % Change Period % Change 3Q15 3Q15 9/30/15 YTD vs vs 9/30/14 9/30/15 vs $ in millions 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 3Q14 2Q15 YTD YTD 9/30/14 YTD Servicing fees $ 1,238 $ 1,288 $ 1,302 $ 1,301 $ 1,273 $ 1,325 $ 1,294 (0.6)% (2.3)% $ 3,828 $ 3,892 1.7% Management fees
Slide 6: GAAP-Basis Expenses
GAAP-Basis Expenses Quarters % Change Period % Change 3Q15 3Q15 9/30/15 YTD vs vs 9/30/14 9/30/15 vs $ in millions 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 3Q14 2Q15 YTD YTD 9/30/14 YTD Compensation and employee $ 1,157 $ 978 $ 953 $ 972 $ 1,087 $ 984 $ 1,051 10.3% 6.8% $ 3,088 $ 3,122 1.1% benefits Infor
Slide 7: First nine months of 2015 impacted by low interest rates and stronger U.S. dollar
First nine months of 2015 impacted by low interest rates and stronger U.S. dollar; 3Q15 further impacted by lower global equity markets Operating-Basis (Non-GAAP) Financial Highlights1 • Year-to-date (nine months ended September • 3Q15 highlights: 30, 2015) comparisons from same period in – EPS of $
Slide 8: 2015 YTD total fee revenue growth exceeded expense growth
2015 YTD total fee revenue growth exceeded expense growth Operating-Basis (Non-GAAP) Results1 Operating Leverage, Revenue Growth (%) less Revenue ($M) Expense Growth (%) +1.8% 9/30/15 YTD (9/30/15 YTD vs 9/30/14 YTD) 7,913 8,057 vs 2.8 9/30/14 YTD 1.8 -101bps 6,182 6,413 3.7% 1,727 1,650 (4.5)% 4 -6
Slide 9: Operating-basis EPS decreased from 3Q14 to 3Q15
Operating-basis EPS1 decreased from 3Q14 to 3Q15 primarily driven by higher expenses, lower NIR and higher preferred dividends, partially offset by lower taxes, impact of share buyback and higher fee revenue Operating-Basis EPS1 ($) 3Q15 vs 3Q14 -14.1% • Operating-basis EPS1 decreased in 1.37 1.37 3
Slide 10: Operating-basis fee revenue growth from 3Q14 to 3Q15 impacted by stronger U.S. dollar
Operating-basis fee revenue1 growth from 3Q14 to 3Q15 impacted by stronger U.S. dollar and lower international equity markets Notable items in 3Q15: Operating-Basis Revenue1 • Money market fee waivers of $9.8M ($M) • Performance fees of $1.0M Notable variances 3Q15 vs 3Q14: • The stronger U.S. dolla
Slide 11: Significantly reduced the level of deposits on our balance sheet in 3Q15
By working with our clients, we significantly reduced the level of deposits on our balance sheet in 3Q15 Operating-Basis (Non-GAAP) Results1 Average Earning Assets ($B) 3Q15 vs 3Q14 3Q15 vs 2Q15 +1.4% -5.2% • The decline in deposits during 3Q15 largely occurred towards the end of the quarter, thus 2
Slide 12: Managing expenses and the impact of stronger U.S. dollar
Managing expenses and the impact of stronger U.S. dollar partially offset regulatory compliance expense growth Notable items in 3Q15: Operating-Basis Expenses1 • $41M gain related to a recovery from certain Lehman Brothers claims included in Other expenses ($M) • $41M in securities processing costs
Slide 13: Continue to maintain high-quality balance sheet
Continue to maintain high-quality balance sheet… 3Q151 Balance Sheet Highlights Investment • Continue to reposition investment portfolio in support of balance sheet optimization portfolio2 • Size: $97B • Credit profile: 92% rated AAA/AA • Fixed-rate/floating-rate mix: 60%/40% • Duration: 2.1 years •
Slide 14: ...and our capital ratios remain strong
…and our capital ratios remain strong 3Q15 Quarter-End Capital1 Positions June 30, Sept 30, 2015 2015 • 3Q15 tier 1 leverage and Basel III Ratios2: supplementary leverage ratios, Common equity tier 1 ratio (advanced approaches) 12.2% 12.1% both on actual and fully phased-in basis, increased primaril
Slide 15: Operating-basis fee revenue growth outlook for 2015 compared to 2014
Operating-basis fee revenue growth outlook for 2015 compared to 2014 now likely lower than the previously communicated 4%-7% due to the recent drop in equity markets, particularly in emerging markets1 • Operating-basis fee revenue growth outlook for 2015 compared to 2014 now likely lower than the pr
Slide 16: Continue to focus on 2015 goals to deliver shareholder value
Continue to focus on 2015 goals to deliver shareholder value in a challenging environment • While lower equity markets impacted 3Q15 results, we continue to focus on key priorities: – Delivering value-added solutions to our clients – Investing in growth initiatives – Diligently managing expenses – R
Slide 17: Appendix
Appendix Impact of Currency Translation 18-21 Footnotes to Slide 14 22-23 Operating-Basis (Non-GAAP) Results 24-27 Investment Portfolio 28-32 Definition of Metrics 33-34 Non-GAAP Measures, Regulatory Capital Ratios and 35-36 Reconciliations 17
Slide 18: Impact of Currency Translation
Impact of Currency Translation 18
Slide 19: 3Q15 operating-basis revenue negatively impacted by currency translation
3Q15 operating-basis revenue1 was negatively impacted and operating-basis expenses1 were positively impacted by currency translation when compared to 3Q142 Operating-Basis Fee Revenue1 ($M) Operating-Basis NIR1 ($M) +4.2% -6.4% 2,098 2,120 2,186 580 543 663 66 529 14 14 3Q14 3Q15 Impact of 3Q15 3Q14
Slide 20: Impact of currency translation is minor on 3Q15 compared to 2Q15
Impact of currency translation is minor on 3Q15 when compared to 2Q152 Operating-Basis Fee Revenue1 ($M) Operating-Basis NIR1 ($M) -2.5% -4.7% 2,180 2,120 2,125 556 529 530 5 5 1 1 2Q15 3Q15 3Q15 2Q15 3Q15 Impact of 3Q15 Reported Reported Excluding Reported Reported Currency Excluding FX Impact Tran
Slide 21: 9/30/15 YTD operating-basis revenue impacted by foreign exchange translation
9/30/15 YTD operating-basis revenue1 was negatively impacted and operating-basis expenses1 were positively impacted by foreign exchange translation when compared to 9/30/14 YTD2 Operating-Basis Fee Revenue1 ($M) Operating-Basis NIR1 ($M) +7.2% -1.9% 6,625 1,727 1,695 6,182 6,413 1,650 212 212 45 45
Slide 22: Footnote to Slide 14
22 Footnote to Slide 14 STATE STREET.
Slide 23: Footnotes to slide 14
Footnotes to slide 14 1Unless otherwise specified, all capital ratios referenced on slide 14 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 elsewhere in the Appendix to this presentati
Slide 24: Operating-Basis (non-GAAP) Results
Operating- Basis (non- GAAP) Results 24
Slide 25: Summary of Operating-Basis (Non-GAAP) Results
Summary of Operating-Basis (Non-GAAP) Results1 Quarters % Change Period % Change 3Q15 3Q15 9/30/15 YTD vs vs 9/30/14 9/30/15 vs $ in millions, except per share data 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 3Q14 2Q15 YTD YTD 9/30/14 YTD Revenue $ 2,559 $ 2,676 $ 2,678 $ 2,724 $ 2,677 $ 2,733 $ 2,647 (1.2)%
Slide 26: Operating-Basis (Non-GAAP) Revenue
Operating-Basis (Non-GAAP) Revenue1 Quarters % Change Period % Change 3Q15 3Q15 9/30/15 YTD vs vs 9/30/14 9/30/15 vs $ in millions 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 3Q14 2Q15 YTD YTD 9/30/14 YTD Servicing fees $ 1,238 $ 1,288 $ 1,302 $ 1,301 $ 1,273 $ 1,325 $ 1,294 (0.6)% (2.3)% $ 3,828 $ 3,892 1.7
Slide 27: Operating-Basis (Non-GAAP) Expenses
Operating-Basis (Non-GAAP) Expenses1 Quarters % Change Period % Change 3Q15 3Q15 9/30/15 YTD vs vs 9/30/14 9/30/15 vs $ in millions 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 3Q14 2Q15 YTD YTD 9/30/14 YTD Compensation and employee $ 1,085 $ 974 $ 955 $ 962 $ 1,088 $ 984 $ 976 2.2% (0.8)% $ 3,014 $ 3,048 1.1
Slide 28: Investment Portfolio
28 Investment Portfolio STATE STREET.
Slide 29: Investment portfolio consists of government & agency, structured securities and unsecured credit
Investment portfolio consists of government & agency, structured securities and unsecured credit Balances1 as of September 30, 2015 Government / Agency Structured Securities Unsecured Credit Treasuries Asset-backed securities (ABS) Corporate bonds Agency debentures Mortgage-backed Municipals securit
Slide 30: Investment portfolio has high quality assets
Investment portfolio has high quality assets Investment Portfolio Assets1 ($B) • 92.1% rated AAA/AA • Assets selected using rigorous credit process • Unrealized after-tax mark-to-market (MTM) gain of • Diversified by asset class and geography $411 million 2 $ in U.S. Treasuries Unrealized After-tax
Slide 31: Investment portfolio has high quality assets across asset classes
Investment portfolio has high quality assets across asset classes Holdings by Asset Class as of September 30, 2015 Ratings Unrealized After-tax Book Value Book Value MTM Gain / Fixed Rate/ UST/AGY3 AAA AA A BBB <BBB NR4 ($)1 (% Total)1 (Loss) ($M)2 Floating Rate Government & agency securities 85% 9%
Slide 32: Investment portfolio has high quality assets among Non-U.S. investments
Investment portfolio has high quality assets among Non-U.S. investments Non-U.S. Investment as of September 30, 2015 AAA, 81.8% September 30, 2015 Book Book Value ($B) Value Average Gov't/ ABS ABS Corporate Covered AA, 7.8% ($B) Rating Agency (1) FRMBS All Other Bonds Bonds Other A, 7.6% United King
Slide 33: Definition of Metrics
33 Definition of Metrics STATE STREET.
Slide 34: Definition of Metrics
Definition of Metrics Earnings per Net income available to common shareholders divided by average common share (EPS) shares outstanding Return on equity (Net income less dividends on preferred stock) divided by average common equity (ROE) Pre-tax Income before income tax expense divided by total rev
Slide 35: Non-GAAP Measures, Regulatory Capital Ratios and Reconciliations
Non-GAAP Measures, Regulatory Capital Ratios and Reconciliations 35
Slide 36: Non-GAAP measures, regulatory capital ratios and reconciliations
Non-GAAP measures, regulatory capital ratios and reconciliations In addition to presenting State Street’s financial results in conformity with U.S. generally accepted accounting principles, referred to as GAAP, and used in the calculation of identified capital ratios, management also presents result