State Street Corporation · NYSE:STT
State Street — Investor Day (February 2015)
54 slides from State Street's investor day presentation, Feb 25, 2015
Slide 1: Leadership Through Continuous Innovation
Leadership Through Continuous Innovation Investor Day Jay L. Hooley Chairman & CEO Wednesday, February 25, 2015
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 and capital condition, results of operations, investment portfolio performance
Slide 3: Agenda
3 Agenda 12:30 – 12:50 PM Leadership Through Continuous Innovation 12:50 – 1:30 PM Panel I: Innovation in Client-Focused Solutions 1:30 – 2:00 PM Panel II: Innovation in Products & Technology Solutions 2:00 – 2:25 PM Delivering Shareholder Value in a Challenging Environment 2:25 – 3:00 PM Closing Re
Slide 4: A leading global provider of financial services
4 All data as of or for the year-end December 31, 2014, as applicable. AUA: assets under custody and administration; AUM: assets under management. 1 Please see Appendix for footnotes 2-9. A leading global provider of financial services • #1 U.S. Mutual Fund Accounting2 • #1 Offshore Fund Servicing3
Slide 5: Our history reflects our culture of innovation
5 Total ETF Servicing Platform Our history reflects our culture of innovation State Street Global Advisors Multicurrency Horizon Platform SPDR ETF ETF Servicing FX Connect Formed Transfer Agency JV (BFDS) Fund Administration Business Middle Office Outsourcing Acquisition: IFS Acquisition: Deutsche B
Slide 6: Delivered solid growth in 2014
6 1 Where applicable, as compared to 2013. Results presented on an operating basis, a non-GAAP presentation. Refer to Appendix included with this presentation for explanations of our non-GAAP measures and for reconciliations of our operating-basis financial information. 2 Operating leverage is defin
Slide 7: Focused strategy supports long-term financial goals
7 1 Long-term goals presented on an operating-basis, a non-GAAP presentation, and do not reflect the near term expectations. Refer to Appendix included with this presentation for explanation of our non-GAAP measures. Focused strategy supports long-term financial goals LONG-TERM SHAREHOLDER VALUE BUI
Slide 8: Building on our strong core
8 CAGR: compound annual growth rate. Building on our strong core • Strong asset servicing and asset management fee growth: − CAGR of 9.1% from 2009 to 2014 and 6.9% from 2013 to 2014 • In 2014, $1.1 trillion in new asset servicing commitments and net new assets to be managed of $28 billion • Focus o
Slide 9: Achieving a digital enterprise
9 Achieving a digital enterprise • Further operational efficiencies • Systems resiliency and scalability • Lower unit cost • Enhanced data flexibility • Continued cloud migration • Faster speed to market Business Operations and Information Technology Transformation initiatives have driven wholesale
Slide 10: Investing in additional opportunities for growth
10 Investing in additional opportunities for growth • Globalizing alternative investment servicing capabilities (technology, global real estate platform, hedge funds) • Developing solutions to help clients navigate evolving regulatory environment • Continuing to enhance ETF servicing platform • Deep
Slide 11: Optimizing capital
11 1 Target presented on an operating basis, a non-GAAP presentation. Refer to Appendix included with this presentation for explanations of our non-GAAP measures. Optimizing capital Investing in Growth Returning Capital to Shareholders • Geographic footprint • New products and services • Digital Ent
Slide 12: Up next are two panels to expand on our innovation focus
12 Up next are two panels to expand on our innovation focus Moderator Jay Hooley Panelists George Sullivan Leadership in Alternative Investment Solutions Susan Dargan Offshore capabilities for global clients Mark Snyder FX innovation Greg Ehret SSGA products and solutions Moderator Mike Rogers Panel
Slide 13: PANEL I: Innovation in Client-Focused Solutions
PANEL I: Innovation in Client-Focused Solutions Investor Day Jay Hooley, Chairman & CEO George Sullivan, EVP, Global Head of Alternative Investment Solutions Susan Dargan, EVP, Head of Global Services Ireland and Channel Islands Mark Snyder, EVP, Head of Sales, Trading and Research, SSGM Greg Ehret,
Slide 14: Global leadership in Alternative Investment Solutions
14 1 eVestment Administrator Survey, Q2 2014. 2 State Street data as of December 31, 2014. Innovation and strategic acquisitions led to our global leadership in Alternative Investment Solutions $1,3192 $755 $649 $566 $505 $280 $272 $199 $121.3 $301.3 STT CITCO BNY SS&C C JPM SEI RBC $896.6 Alternati
Slide 15: Our alternative assets have grown at more than twice the rate of the market
15 1 Hedge Fund Research, Towers Watson, Preqin, June 30, 2014. 2 PWC “Asset Management: Brave New World”. Our alternative assets have grown at more than twice the rate of the market Alternative Investments Market1 (AUA $T) State Street Alternative Investment Solutions (AUA $T) $2.7 $3.6 $4.7 $4.4 $
Slide 16: Alternative investments market trends and our advantages
16 Market Trends: Our Advantages: Globalization Alternative managers seek investment opportunities and distribution across global markets, and specifically where wealth is emerging • Operations footprint supporting clients in North America, Europe and Asia • We have the only global bespoke platform
Slide 17: European offshore market is the second largest funds market globally
17 1 Undertakings for Collective Investment in Transferable Securities. 2 Market Data Monterey. 3 EFAMA. The European offshore market is the second largest funds market globally… State Street − Early Leaders in European Offshore Market What makes this market attractive to investment managers? • Open
Slide 18: We have led in the European offshore markets for 25 years
18 488 462 236 235 216 STT JPM RBC BNP BK 1 Monterey Survey, December 2013. 2 Monterey Survey, June 2014. … and we have led in the European offshore markets for 25 years Luxembourg Domiciled Funds1 (AUA $B) Irish Domiciled Funds2 (AUA $B) • We are specialist service providers to international instit
Slide 19: Well positioned to support clients' evolving offshore needs
19 We are well positioned to support our clients’ evolving offshore needs Market Trends: Our Advantages: Globalization Offshore clients look to us to support their global distribution goals • Our significant presence in Luxembourg and Ireland, combined with our global footprint, and ongoing investme
Slide 20: Our FX capabilities are aligned with macro trends
20 Our FX capabilities are aligned with macro trends Globalization Demographic Trends Regulation of FX Market Electronification of Markets • Increasing cross border flows across asset classes as more investing is internationalized • More countries are attracting foreign investors’ capital • Increase
Slide 21: Focus on institutional investors, innovation and FX diversification
21 Our focus on institutional investors, innovation and FX product diversification has led to sustained growth 1990-1995 Established FX Trading & Sales in Sydney, Tokyo, Toronto and Montreal Branches 1980’s London & Hong Kong FX Trading & Sales 1995 Introduced Strategy Research Product 1996 FX Conne
Slide 22: Our FX results and competitor comparison
22 1 Based on management estimates. 2 FX Trading Revenue: Competitor Analysis. 3 2014 Euromoney FX Survey. Our FX results and competitor comparison FX Sales & Trading vs Indirect FX 45% 59% 55% 41% $0 $100 $200 $300 $400 $500 $600 $700 2010 2014 R ev en u e ($ M )1 FX Sales & Trading Indirect FX Ind
Slide 23: Elements of current innovation in FX
23 1 2014 Euromoney FX Survey. 2 2014 FX Week. 3 2014 Profit & Loss Reader’s Choice Awards. 4 2014 Euromoney FX Survey. Elements of current innovation in FX – increasing the slope of our growth trajectory Differentiated strategy Sales & Trading and Research has Multiple Initiatives to Seed Long Term
Slide 24: Well positioned for continued growth in FX
24 We are well positioned for continued growth in FX Portfolio of Products • Leading provider of a broad and diverse range of FX products and services to institutional investors • Our strong competitive position is a direct result of innovative organic strategies, academic partnerships and timely ac
Slide 25: SSGA is well positioned for growth
25 *As of December 31, 2014. 1 This AUM includes the assets of the SPDR Gold ETF (approx. $27 billion as of December 31, 2014), for which State Street Global Markets, LLC, an affiliate of State Street Global Advisors, serves as the distribution agent. 2 Includes Absolute Return, Commodities, Currenc
Slide 26: Key areas of focus in 2015 and beyond
26 Key areas of focus in 2015 and beyond SSGA’s strategy is focused to materially grow share and position in fast-growing segments of the market • Increased breadth and depth of global client engagement • Greater collaboration across State Street to provide the right solutions and products to our cl
Slide 27: We are a leading sponsor of ETFs
27 1 ETFGI, December 2014. 2 McKinsey & Company, The Second Act Begins for ETFs, August 2011. 3 Cerulli: Exchange Traded Funds Markets 2014. We are a leading sponsor of ETFs SPDR ETF revenue CAGR of 25% for the five-year period ending in 2014 Powerful Brand ETF AUM (as of 31 Dec 2014) • $466B New Pr
Slide 28: Questions & Answers: Panel I
Questions & Answers PANEL I: Innovation in Client- Focused Solutions
Slide 29: PANEL II: Innovation in Products & Technology Solutions
PANEL II: Innovation in Products & Technology Solutions Investor Day Mike Rogers, President & COO Chris Perretta, EVP & Chief Information Officer Gunjan Kedia, EVP, Head of Investment Servicing, Americas Frank Koudelka, SVP, ETF Product Specialist Wednesday, February 25, 2015
Slide 30: Transformation program created foundation for continued success
30 1 Framework Source: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, J. Ross, P. Well, D. Robertson, HBS Press, 2006. 2 Positions for “State Street” represent State Street estimates. The CISR was not included in the determination of the State Street estimates. Bu
Slide 31: Program achieved more than $625 million in run rate savings
31 1 The multi-year Business Operations and Information Technology Transformation program achieved, over the course of the program, greater than $625 million of total pre-tax savings, on annual basis, with full effect in 2015. Pre-tax expense savings relate only to that Transformation program and ar
Slide 32: Foundation for achieving a digital enterprise
32 We also laid a foundation for achieving a digital enterprise … • Seamless global operations • Increased efficiency • Integrated client operations • Data integrity across platforms • More resilient infrastructure • Configurable to drive performance and regulatory needs • Built for change • Speed t
Slide 33: Built capabilities for our core business
33 … and built capabilities for our core business More than a million data points are captured and processed daily: • Trades • Corporate actions • Security prices • Subscriptions and redemptions •Wires • Cash • Distributions and expenses • Foreign exchange State Streeters in 29 locations, often in 2
Slide 34: Delivering value-added services and solutions to clients
34 We are delivering value-added services and solutions to clients… Industry Trend: Foundational Capabilities: Potential Value: World’s largest pension plans insourcing some asset management; creating a new breed of “Asset Owner-Asset Manager” Globally consistent technology platforms and data integr
Slide 35: Launching new solutions built on transformation
35 Business Insights Regulation Oversight & Control … and launching new solutions built on transformation Selected Product Portfolio Pre-commercialization: Commercialized: Ideation & Design Development Initial Release Track & Improve • Fund Insights℠: Sub-TA Fees Index • Fund Insights℠: Liquidity In
Slide 36: The global ETF market is large and fast growing
36 1 ETFGI. December 2014. 2 PwC. ETF 2020: Preparing for a New Horizon, January 2015. 3 McKinsey & Co: Active ETFs on Way to $500 Billion, January 2013. 4 Cerulli Associates: The State of US Retail and Institutional Asset Management, November 2012. 5 Securities and Exchange Commission website. The
Slide 37: Our services, solutions and scale position us globally
37 Our services, solutions and scale position us to address clients’ emerging needs and issues globally 180 ETFs serviced $43.3B CA 557 ETFs serviced $1,236.0B US 405 ETFs serviced $64.4B LU 312 ETFs serviced $180.4B IE 64 ETFs serviced $37.0B DE 12 ETFs serviced $7.1B CH 6 ETFs serviced $8.1B HK 2
Slide 38: TotalETF is a single, global platform
38 Integration to 15 Core State Street Technology Platforms TotalETF℠ is a single, global, state-of-the-art platform for servicing our clients Real Time Data Infrastructure Real-time Transparency Precise Information Automated Oversight C O N T A C T S Operations Market Private Cloud Proprietary Real
Slide 39: Questions & Answers: Panel II
Questions & Answers PANEL II: Innovation in Products & Technology Solutions
Slide 40: Delivering Shareholder Value in a Challenging Environment
Delivering Shareholder Value in a Challenging Environment Investor Day Michael W. Bell EVP & CFO Wednesday, February 25, 2015
Slide 41: Delivering shareholder value in a challenging environment
41 1 Represents operating-basis (non-GAAP) financial information. Operating-basis financial outlook is a non- GAAP presentation. Refer to Appendix included with this presentation for explanations of our non-GAAP measures. 2 Long-term operating basis financial goals: EPS growth of 10%-15%; revenue gr
Slide 42: 2015 Outlook
42 1 Includes impact of expected currency and market changes. Operating-basis (non-GAAP) financial information, where noted. Operating-basis financial outlook is a non-GAAP presentation. Refer to Appendix included with this presentation for explanations of our non-GAAP measures. 2015 Outlook1 - Fore
Slide 43: 2015 Outlook: fee revenue growth
43 2015 Outlook1 Full-year 2015 operating-basis1 total fee revenue growth expectation of 4%-7% compared to 2014 driven by: • Continued innovation in services and solutions • Expected increase in new business levels • Strong capabilities outside of U.S. 2015 revenue growth aligned with our long-term
Slide 44: 2015 Outlook: expenses
44 1 Includes operating-basis (non-GAAP) financial information, where noted. Operating-basis financial targets are a non-GAAP presentation. Refer to Appendix included with this presentation for explanations of our non-GAAP measures. 2 See slide 42 for related assumptions. 3 Operating leverage is def
Slide 45: Net interest revenue scenarios
45 Static Scenario Rising Scenario Primary Drivers2 State Street Operating-basis1 NIR $2.07B-$2.17B $2.15B-$2.25B • Short-term and long-term interest rates • Foreign exchange rates • Deposit levels • Regulatory expectations • Geographic and business mix Interest Rate Path Static from December 31, 20
Slide 46: Expected improvement in NIM over long term
46 We reported a 4Q14 operating-basis1 Net Interest Margin (NIM) of 1.04%. Excluding excess deposits, the 4Q14 operating-basis NIM1 would have been approximately 1.30% 1 Includes operating-basis (non-GAAP) financial information, where noted. Operating-basis financial targets are a non-GAAP presentat
Slide 47: Optimizing capital to satisfy regulatory requirements
47 Optimizing capital to satisfy a multitude of regulatory requirements • Maintaining our 10% common equity tier 1 target: – The standardized approach is currently more constraining for us than the advanced approaches • Expect the Supplementary Leverage Ratio (SLR) to be our constraining capital req
Slide 48: 2015 Outlook: returning capital to shareholders
48 2015 Outlook • Continuing to execute on our capital plans • Issued $750 million of preferred shares at 6% in 4Q14, with the first dividend to be paid in 1Q15: – Expect total dividends on all series of preferred shares outstanding at December 31, 2014 to be approximately $118 million in 2015, incl
Slide 49: Maintaining our long-term financial goals
49 1 Long-term goals presented on an operating-basis, a non-GAAP presentation and do not reflect near-term expectations. Refer to Appendix included with this presentation for explanations of our non-GAAP measures. 2 Organic growth excludes revenue growth from acquisitions. 3 Operating leverage is de
Slide 50: Delivering shareholder value in a challenging environment
50 1 Includes operating-basis (non-GAAP) financial information, where noted. Operating-basis financial outlook is a non-GAAP presentation. Refer to Appendix included with this presentation for explanations of our non- GAAP measures. Delivering shareholder value in a challenging environment Focusing
Slide 51: Appendix: Footnotes and Non-GAAP Measures
51 Appendix Footnotes to Slide 4 Non-GAAP Measures The foregoing presentation includes financial information presented on a GAAP basis as well as on a non-GAAP, or “operating basis.” Management measures and compares certain financial information on an operating basis, as it believes that this presen
Slide 52: Appendix: Footnotes to slide 1
52 Appendix: Footnotes to slide 4 2 #1 Mutual Fund Accounting, Mutual Fund Service Guide, 2014 3 #1 Offshore Fund Servicing, Monterey Insight, Ireland Fund Report, 2014 4 #1 Global Alternative Asset Servicing, Evestment Administrator Survey, June 2014 5 #1 Securities Finance, Global Investor Magazin
Slide 53: Appendix: Non-GAAP measures
53 Appendix: Non-GAAP measures 2014 vs. (Dollars in millions) 2013 Total Revenue: Total revenue, GAAP basis $ 10,295 $ 9,884 4.2 % Tax-equivalent adjustment associated with tax-advantaged investments 288 158 Tax-equivalent adjustment associated with tax-exempt investment securities 173 142 Discount
Slide 54: Appendix: Non-GAAP measures
54 Appendix: Non-GAAP measures 2014 vs. (Dollars in millions, except per share amounts) 2013 Income Before Income Tax Expense: Income before income tax expense, GAAP basis $ 2,458 $ 2,686 (8.5) % Net pre-tax effect of non-operating adjustments to revenue and expenses 746 343 Income before income tax