State Street Corporation · NYSE:STT
State Street — Q3 2019 Earnings Presentation
22 slides from State Street's earnings presentation, Oct 18, 2019
Slide 1: 3Q 2019 Financial Highlights
3Q 2019 Financial Highlights October 18, 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 third quarter 2019 financial results. That news release contains a more detailed discussion of many of the matters descri
Slide 3: 3Q19 highlights
3Q19 highlights All comparisons are to corresponding prior year periods unless noted otherwise • Total revenue of $2.9B – Down (3)% YoY primarily driven by challenging industry conditions, partially offset by CRD revenue Financial – Up 1% QoQ primarily driven by improved servicing fees, FX trading,
Slide 4: Summary of 3Q19 results
Summary of 3Q19 results Quarters4 % ∆ ($M, except EPS data, or where otherwise noted) 3Q18 2Q19 3Q19 3Q18 2Q19 Revenue: Servicing fees $1,333 $1,252 $1,272 (5)% 2% Management fees 474 441 445 (6) 1 Notable items Foreign exchange trading services 288 273 284 (1) 4 ($M, except 3Q18 2Q19 3Q19 Securitie
Slide 5: AUC/A and AUM levels reflect higher end of period market levels and client net inflows
AUC/A and AUM levels reflect higher end of period market levels and client net inflows AUC/A and AUMA Market indices5 AUC/A ($T, as of period-end) 3Q19 vs (% change) +0.4% • (3)% decrease from 3Q18 3Q18 2Q19 primarily driven by: -3% EOP 2% 1% – A previously announced client S&P 500 Daily Avg 43 $34.
Slide 6: Revenue: Servicing fee performance reflects signs of moderating fee pressure and new business wins
Revenue: Servicing fee performance reflects signs of moderating fee pressure and new business wins Total revenue and Servicing fees Servicing fees performance ($M) +1% 3Q19 Servicing fees of $1,272M down (5)% YoY, but up 2% QoQ -3%, -2% ex FXA • Down (5)% YoY, or (3)% ex FX, primarily driven byA: To
Slide 7: Revenue: Management Fees, Markets and Processing & other revenue impacted by market levels and FX volatility
Revenue: Management Fees, Markets and Processing & other revenue impacted by market levels and FX volatility A Management fees, Markets and other revenue 3Q19 performance ($M) Management fees, Markets and Processing & other revenue of $987M flat YoY and down (2)% QoQ Total revenue $2,989 $2,873 $2,9
Slide 8: Advancing our front-to-back strategy
Advancing our front-to-back strategy CRD financial performance Continued strong client engagement 3Q19 select metrics (Standalone, $M) Active discussions with clientsC CRD standalone financials11 2Q19 3Q19 RevenueA $91 $85 STT & STT CRD New Operating expenses 46 56 Total CRD Only Only Prospect Pre-t
Slide 9: Revenue: NII supported by episodic market-related benefits and active deposit management
Revenue: NII supported by episodic market-related benefits and active deposit management A NII and NIM 3Q19 performance ($M) Total 2,989 NII of $644M revenue $2,873 2,903 • Down (4)% YoY primarily due to lower long-end rates and MBS Servicing premium amortization, as well as mix shift from non-inter
Slide 10: Underlying expenses flat QoQ as savings offset technology infrastructure costs and CRD expansion
Underlying expenses flat QoQ as savings offset technology infrastructure costs and CRD expansion Non-GAAP ex-notable itemsA Expenses ex-notable items YoY: Underlying expenses up 2%, or down (1)% ($M) excluding CRD costs of ~$73MC • Compensation and benefits down (2)% YoY primarily driven by -0.3% sa
Slide 11: FY2019 Expense Program of ~$400M, exceeding initial goal
FY2019 Expense Program of ~$400M, exceeding initial goal; ~$275M savings already realized YTD A,B Underlying expenses 2019 actions ($B) Resource discipline of ~$210M17 -1.5% • Reduce senior pyramid by 15% • Hiring freeze successful; strengthening internal talent 8.57 8.43 growth and enabling mobilit
Slide 12: Investment portfolio & capital ratios
Investment portfolio & capital ratios Investment portfolio highlights Quarter-end capital ratios ($B, book value and portfolio metrics as of quarter-end) (%, as of period-end) Capital Ratios18,19 97.5 $93.2 13.0% $90.1 $92.0 $87.4 11.7% 16% 11.6% 11.3% 11.5% 11.5% 11.3% 16% 17% 10.8% Non-HQLA 39% 19
Slide 13: Summary and outlook
Summary and outlook 3Q19 Financial performance • EPS of $1.42, or $1.51 excluding notablesA • Flat sequential fee revenue as improved servicing fees, management fees and FX trading were offset by seasonal factors and lower processing fees and other revenue • NII increased 5% sequentially primarily d
Slide 14: Appendix
Appendix FY2019 Outlook 15 Medium-term financial targets 16 Reconciliation of underlying expenses 17 Endnotes 18 – 19 Forward-looking statements 20 Non-GAAP measures 21 Definitions 22 14
Slide 15: FY2019 Outlook
FY2019 Outlook: Increasing productivity savings from 4% to 4.5%, resulting in an underlying expense reduction of 1.5%A Market and operating environment • Slowing global growth • 4Q19 daily average equity market levels flat to September month end spot levels • Market forward interest rates, with rest
Slide 16: 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 17: Reconciliation of underlying expenses
Reconciliation of underlying expenses Quarterly reconciliation4 (Dollars in millions) 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 Total expenses, GAAP basis 2,268 2,170 2,091 2,486 2,293 2,154 2,180 Less: Notable expense items: Repositioning charges: Compensation and employee benefits (61) (198) Occupancy (1
Slide 18: Endnotes
Endnotes 1. New asset servicing mandates, including announced front-to-back investment servicing clients, may be subject to completion of definitive agreements, approval of applicable boards and shareholders and customary regulatory approvals. New asset servicing mandates and servicing assets remain
Slide 19: Endnotes
Endnotes 12. CRD annual contract value bookings represent signed annual recurring revenue contract value. CRD annual contract value bookings in 2Q19 of $31M includes $25M of bookings with affiliates, including SSGA. CRD annual contract value bookings in 3Q19 of $5M did not include any bookings with
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 Barclays Agg Barclays Agg represents Barclays Global Aggregate Bond Index Bps Basis points, with one basis point representing one hundredth of one percent CCAR Comprehensive Capital Analysis and Review CET1 Comm