State Street Corporation · NYSE:STT
State Street — Q1 2019 Earnings Presentation
22 slides from State Street's earnings presentation, Apr 23, 2019
Slide 1: 1Q 2019 Financial Highlights
1Q 2019 Financial Highlights April 23, 2019 (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 first quarter 2019 financial results. That news release contains a more detailed discussion of many of the matters descri
Slide 3: 1Q19 highlights
1Q19 highlights All comparisons are to prior year periods unless noted otherwise • Total revenue of $2.9B down (4)%, primarily driven by challenging industry conditions and lower average equity market levels, partially offset by CRD revenue and NII Financial • NII of $673M up 5% and NIM expansion to
Slide 4: Focused on realizing our vision with five key strategic priorities
Focused on realizing our vision with five key strategic priorities Vision Medium-term strategic priorities Essential 1 Reignite servicing fee growth partner 2 Innovate to grow diversified revenue streams Leading platform with a broad revenue mix Delivering results through 3 Deploy the leading front-
Slide 5: Summary of 1Q19 results
Summary of 1Q19 results Quarters6 % ∆ ($M, except EPS data, or where otherwise noted) 1Q18 4Q18 1Q19 1Q18 4Q18 Revenue: Notable Items Servicing fees $1,421 $1,286 $1,251 (12)% (3)% ($M, except 1Q18 4Q18 1Q19 Management fees 472 440 420 (11) (5) EPS data) Foreign exchange trading services 304 294 280
Slide 6: AUC/A and AUM levels driven by recovering equity market returns
AUC/A and AUM levels driven by recovering equity market returns AUC/A and AUMA Market indices AUC/A ($T, as of period-end) 1Q19 vs +3% (% change) • (2)% decrease from 1Q18 1Q18 4Q18 -2% primarily driven by: $33.3 – Negative impact of FX translation EOP 7% 13% $31.6 $32.6 S&P 500 – A previously annou
Slide 7: Revenue: Servicing fee performance reflects challenging industry conditions
Revenue: Servicing fee performance reflects challenging industry conditions, partially offset by new business Total revenue and Servicing fees Servicing fees performance ($M) 1Q19 Servicing fees of $1,251M -4%, A -2% ex FX • Down (12)% YoY primarily driven by: – Challenging industry conditions inclu
Slide 8: Revenue: YoY average market levels and volumes impacted Management Fees and Markets revenue
Revenue: YoY average market levels and volumes impacted Management Fees and Markets revenue A Management fees, Markets and other revenue 1Q19 performance ($M) Management fees, Markets and other revenue of $1,009M up 2% YoY and down 3% QoQ • Management fees of $420M Total – Down (11)% YoY primarily r
Slide 9: Advancing our Front-to-Back strategy
Advancing our Front-to-Back strategy CRD Financial performance Continued strong client engagement 1Q19 select metrics ($M) CRD core financials 1Q19 Active discussions with clientsC RevenueA $99 Operating expenses $41 STT & STT CRD New Total CRD Only Only Prospect Pre-tax income $58 New bookings2 $6
Slide 10: Revenue: NII and NIM YoY expansion driven by higher U.S. interest rates
Revenue: NII and NIM YoY expansion driven by higher U.S. interest rates, partially offset by lower deposits A NII and NIM 1Q19 Performance ($M) NII of $673M • Up 5% YoY primarily due to higher U.S. interest rates and disciplined pricing, partially offset by lower deposits Total revenue $3,056 $3,023
Slide 11: QoQ underlying expense reduction driven by disciplined cost management
QoQ underlying expense reduction driven by disciplined cost management Non-GAAP ex notable items and seasonal expensesA Underlying Expenses YoY: Underlying expenses up 1%, or down (2)% ($M) excluding CRD • Compensation and employee benefits down (1)% YoY primarily +1%, driven by savings from resourc
Slide 12: 2019 expense savings progress
2019 expense savings progress FY2019 expense savings year-to-dateA BenefitsA Remaining target ~$350M savings ~$190M Target Realized savings Resource discipline of ~$31M • Savings-to-date related to headcount reduction in senior 143 managers – To date, program reached ~40% of planned senior manager R
Slide 13: Investment portfolio & capital ratios
Investment portfolio & capital ratios Investment Portfolio Highlights Quarter-End Capital Ratios ($B, book value as of quarter-end) (%, Fully phased-in as of period-end) 12,13,14 $97.5 Capital Ratios $90.1 $87.4 13.0% 16% 11.7% 19% 11.6% 11.3% 11.5% Non-HQLA 39% 10.8% 8.1% 7.4% 7.2% 6.9% 7.1% 7.2% 7
Slide 14: Summary
Summary 1Q19 Financial performance • EPS of $1.18, or $1.24 excluding notablesA • Sequential quarter underlying expense reduction of 2% demonstrates commitment to aggressively manage expensesB • Returned ~$480M to shareholders, consisting of ~$300M in share repurchases and ~$180M in dividends • Well
Slide 15: Appendix
Appendix FY2019 outlook 16 Medium-term financial targets 17 Endnotes 18 – 19 Forward-looking statements 20 Non-GAAP measures 21 Definitions 22 15
Slide 16: FY2019 Outlook
FY2019 Outlook Targeting 4% productivity savings resulting in ~1% underlying expense reductionA Market and operating environment • Slowing global growth • 2019 daily average equity market levels relatively flat to 2018 • Market forward interest rates, including 0 Fed Fund hikes and • Light flows and
Slide 17: Medium-term financial targets
Medium-term financial targetsA Our strategic priorities will deliver growth, drive innovation and enhance shareholder value Revenue growth 4–5% with CRD Pre-tax margin Further improve by an additional 2%pts EPS growth 10–15% ROE 12–15% Capital return Targeting total payout greater than or equal to 8
Slide 18: Endnotes
Endnotes 1 New asset servicing mandates and servicing assets remaining to be installed in future periods exclude new business which has been contracted, but for which the client has not yet provided permission to publicly disclose and the new business is not yet installed. These excluded assets, whi
Slide 19: Endnotes
Endnotes 11 Revenue synergies of $75-85M mainly represent opportunities to enhance the distribution of State Street products and capabilities to Charles River Development clients, cross sell Charles River Development into State Street client base, expand share of wallet across our combined client ba
Slide 20: 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 21: 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 also presents certain financial information on a basis that excludes or adjusts one or more items from GAAP. This latter basis is a non-G
Slide 22: Definitions
Definitions AUC/A Assets under custody and/or administration AUM Assets under management Bps Basis points, with one basis point representing one hundredth of one percent CCAR Comprehensive Capital Analysis and Review CET1 Common equity tier 1 ratio CRD Charles River Development Diluted earnings per