State Street Corporation · NYSE:STT
State Street — Q4 2015 Earnings Presentation
39 slides from State Street's earnings presentation, Jan 27, 2016
Slide 1: Fourth-Quarter 2015 and Full-Year 2015 Financial Highlights
Exhibit 99.3 State Street Corporation Fourth-Quarter 2015 and Full-Year 2015 Financial Highlights January 27, 2016
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 fourth-quarter 2015 financial results. That news release contains a more detailed discussion of many of the matters described in this presentat
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: Launching State Street Beacon to achieve digital vision and strategy
Launching State Street Beacon to achieve digital vision and strategy Current Focus: Deliver $550M of Digital Vision: Next annual pre-tax net run-rate expense Best-in-class service generation savings by the end of 20201: and solutions of • Leveraging the cloud to drive scale End-to-end service platfo
Slide 5: Summary of GAAP-Basis Results
Summary of GAAP-Basis Results Quarters % Change Full Year % Change 4Q15 4Q15 2015 vs vs vs $ in millions, except per share data 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 4Q14 3Q15 2014 2015 2014 1 Revenue $ 2,480 $ 2,593 $ 2,576 $ 2,625 $ 2,600 $ 2,608 $ 2,614 $ 2,538 (3.3)% (2.9)% $ 10,274 $ 10,360 0
Slide 6: GAAP-Basis Revenue
GAAP-Basis Revenue Quarters % Change Full Year % Change 4Q15 4Q15 2015 vs vs vs $ in millions 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 4Q14 3Q15 2014 2015 2014 1 Servicing fees $ 1,233 $ 1,283 $ 1,296 $ 1,296 $ 1,268 $ 1,319 $ 1,289 $ 1,277 (1.5)% (0.9)% $ 5,108 $ 5,153 0.9% Management fees 292 300 3
Slide 7: GAAP-Basis Expenses
GAAP-Basis Expenses Quarters % Change Full Year % Change 4Q15 4Q15 2015 vs vs vs $ in millions 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 4Q14 3Q15 2014 2015 2014 Compensation and employee $ 1,157 $ 978 $ 953 $ 972 $ 1,087 $ 984 $ 1,051 $ 939 (3.4)% (10.7)% $ 4,060 $ 4,061 - % benefits Information syst
Slide 8: Our 2015 Performance generated mixed results versus our 2015 Outlook
Our 20151 Performance generated mixed results versus our 2015 Outlook Category: 2015 Outlook/Objective2: 2015 Performance (Versus 2014 where applicable): Full-year 2015 operating-basis • 4%-7% • 2.1% total fee revenue growth • 5.3% on a constant currency basis compared to 2014 of: Operating-basis to
Slide 9: Full-year 2015 impacted by heightened regulatory expectations and strengthening U.S. dollar
Full-year 2015 impacted by heightened regulatory expectations, strengthening U.S. dollar, persistent low interest rates, and volatile global equity markets Operating-Basis (Non-GAAP) Financial Highlights1,2 • FY15 compared to FY14: • 4Q15 highlights: – EPS of $4.89 decreased 3% – EPS of $1.21 decrea
Slide 10: 2015 total fee revenue growth exceeded expense growth
2015 total fee revenue growth exceeded expense growth Operating-Basis (Non-GAAP) Results1 Revenue2 ($M) Operating Leverage, Revenue Growth (%) less +0.1% Expense Growth (%) 2015 (2015 vs 2014) 10,616 10,629 vs 1.3 2014 8,298 8,472 2.1% -119bps (6.5)% 0.1 2,314 2,163 4 -6 2014 2015 Revenue Expense Gr
Slide 11: Operating-basis EPS decreased from 4Q14 to 4Q15
Operating-basis EPS1 decreased from 4Q14 to 4Q15 primarily driven by lower fee revenue and NIR, partially offset by lower expenses and impact of the share buyback Operating-Basis EPS1,2 ($) 4Q15 vs 4Q14 -11.0% • Operating-basis EPS1 increased from 1.36 1.36 3Q15 to 4Q15, primarily driven by lower 1.
Slide 12: Operating-basis fee revenue growth from 4Q14 to 4Q15
Operating-basis fee revenue1 growth from 4Q14 to 4Q15 impacted by stronger U.S. dollar and lower average international equity markets partially offset by higher securities finance revenue Notable items in 4Q15: • Money market fee waivers of $9.2M • Performance fees of $4.7M Operating-Basis Revenue1,
Slide 13: Significant reduction of deposits reflected in lower average deposits
Significant reduction of deposits at end of 3Q15 reflected in the lower average level of deposits on our balance sheet for 4Q15 Average Earning Assets Operating-Basis NIR1 and NIM1 ($B) ($M, %) NIR NIR 4Q15 vs 4Q14 4Q15 vs 3Q15 4Q15 vs 4Q14 4Q15 vs 3Q15 -12.6% -3.0% -10.3% -9.0% 600 587 565 2.00 233
Slide 14: 4Q15 expenses primarily driven by lower incentive compensation
4Q15 expenses primarily driven by lower incentive compensation Operating-Basis Expenses1 Notable items in 4Q15: ($M) • $12M settlement with Securities and Exchange Commission Notable variances 4Q15 vs 4Q14: • The stronger U.S. dollar favorably impacted total expenses by 4Q15 vs 4Q14 4Q15 vs 3Q15 app
Slide 15: Continue to maintain high-quality balance sheet
Continue to maintain high-quality balance sheet… 4Q151 Balance Sheet Highlights Investment • Size: $99.8B portfolio2 • Credit profile: 93% rated AAA/AA • Fixed-rate/floating-rate mix: 64%/36% • Duration: 2.2 years • Unrealized after-tax mark-to-market (MTM) gain: $58M3 • Purchases4: $8.9B with avera
Slide 16: …and our capital ratios remain strong
…and our capital ratios remain strong 4Q15 Quarter-End Capital1,2 Positions Sept 30, Dec 31, 2015 2015 • 12/31/15 tier 1 leverage and Basel III Ratios3: supplementary leverage ratios, Common equity tier 1 ratio (advanced approaches) 12.0% 12.5% both on actual and fully phased-in basis, increased pri
Slide 17: State Street Beacon expected to deliver financial benefits through 2020
State Street Beacon expected to deliver financial benefits to be achieved through 2020, but investments will be required to enhance our capabilities Expected Annual Pre- • To achieve estimated annual pre-tax net run-rate expense savings of Tax Net Run-Rate $550M by the end of 2020 for full effect in
Slide 18: 2016 Outlook: Environment continues to be challenging
2016 Outlook1: Environment continues to be challenging and managing our expenses is a high priority • Remain focused on executing our key priorities: –Returning capital to shareholders –Prudently managing expenses –Investing in the business to provide solutions to our clients • Environment continues
Slide 19: 2016 Capital Outlook: Returning capital to shareholders remains a priority
2016 Capital Outlook: Returning capital to shareholders remains a priority • Continuing to execute on our capital plans: – Proactive excess deposit reduction efforts largely complete • The evolution of our capital planning, including meeting regulatory capital and liquidity expectations may lead to
Slide 20: Appendix
Appendix Impact of Currency Translation 21-24 Footnotes to Slide 16 25-26 Operating-Basis (Non-GAAP) Results 27-30 Investment Portfolio 31-35 Definition of Metrics 36-37 Non-GAAP Measures, Regulatory Capital Ratios and 38-39 Reconciliations 20
Slide 21: Impact of Currency Translation
Impact of Currency Translation 21
Slide 22: 4Q15 operating-basis revenue and expenses impacted by currency translation vs 4Q14
4Q15 operating-basis revenue1 was negatively impacted and operating-basis expenses1 were positively impacted by currency translation when compared to 4Q142 Operating-Basis Fee Revenue1,4 ($M) Operating-Basis NIR1 ($M) -0.2% -11.1% 2,132 2,128 587 2,075 522 533 53 513 9 9 4Q14 4Q15 Impact of 4Q15 4Q1
Slide 23: Impact of currency translation is minor on 4Q15 vs 3Q15
Impact of currency translation is minor on 4Q15 when compared to 3Q151 Operating-Basis Fee Revenue2,3 ($M) Operating-Basis NIR2 ($M) -1.5% -2.8% 2,115 2,084 529 513 514 2,075 9 9 1 1 3Q15 4Q15 Impact of 4Q15 3Q15 4Q15 Impact of 4Q15 Reported Reported Currency Excluding Reported Reported Currency Exc
Slide 24: 2015 operating-basis revenue and expenses impacted by foreign exchange translation
2015 operating-basis revenue1 was negatively impacted and operating-basis expenses1 were positively impacted by foreign exchange translation when compared to 20142 Operating-Basis Fee Revenue1,3 ($M) Operating-Basis NIR1 ($M) +5.3% -4.2% 8,734 2,314 2,217 8,298 8,472 2,163 262 262 54 54 2014 2015 Im
Slide 25: Footnote to Slide 16
Footnote to Slide 16 STATE STREET. 25
Slide 26: Footnotes to slide 16
Footnotes to slide 16 1 Unless otherwise specified, all capital ratios referenced on slide 16 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. The lower of our capital ratios calculated under the
Slide 27: Operating-Basis (non-GAAP) Results
Operating- Basis (non- GAAP) Results 27
Slide 28: Summary of Operating-Basis (Non-GAAP) Results
Summary of Operating-Basis (Non-GAAP) Results1 Quarters % Change Full Year % Change 4Q15 4Q15 2015 vs vs vs $ in millions, except per share data 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 4Q14 3Q15 2014 2015 2014 Revenue2 $ 2,554 $ 2,671 $ 2,672 $ 2,719 $ 2,672 $ 2,727 $ 2,642 $ 2,588 (4.8)% (2.0)% $ 1
Slide 29: Operating-Basis (Non-GAAP) Revenue
Operating-Basis (Non-GAAP) Revenue1 Quarters % Change Full Year % Change 4Q15 4Q15 2015 vs vs vs $ in millions 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 4Q14 3Q15 2014 2015 2014 2 Servicing fees $ 1,233 $ 1,283 $ 1,296 $ 1,296 $ 1,268 $ 1,319 $ 1,289 $ 1,277 (1.5)% (0.9)% $ 5,108 $ 5,153 0.9% Manageme
Slide 30: Operating-Basis (Non-GAAP) Expenses
Operating-Basis (Non-GAAP) Expenses1 Quarters % Change Full Year % Change 4Q15 4Q15 2015 vs vs vs $ in millions 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 4Q14 3Q15 2014 2015 2014 Compensation and employee $ 1,085 $ 974 $ 955 $ 962 $ 1,088 $ 984 $ 976 $ 940 (2.3)% (3.7)% $ 3,976 $ 3,988 0.3% benefits I
Slide 31: Investment Portfolio
Investment Portfolio STATE STREET. 31
Slide 32: 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 December 31, 2015 Government / Agency Structured Securities Unsecured Credit Treasuries Asset-backed securities (ABS) Corporate bonds Agency debentures Mortgage-backed Municipals securiti
Slide 33: Investment portfolio has high quality assets
Investment portfolio has high quality assets Investment Portfolio Assets1 ($B) • 92.7% rated AAA/AA • Assets selected using rigorous credit process • Unrealized after-tax mark-to-market (MTM) gain of • Diversified by asset class and geography $58 million 2 $ in U.S. Treasuries Unrealized After-tax b
Slide 34: Investment portfolio has high quality assets across asset classes
Investment portfolio has high quality assets across asset classes Holdings by Asset Class as of December 31, 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% 8%
Slide 35: 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 December 31, 2015 AAA, 80.1% December 31, 2015 Book Book Value ($B) AA, 8.6% Value Average Gov't/ ABS ABS Corporate Covered A, 8.9% ($B) Rating Agency (1) FRMBS All Other Bonds Bonds Other United Kingdo
Slide 36: Definition of Metrics
Definition of Metrics STATE STREET. 36
Slide 37: 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 38: Non-GAAP Measures, Regulatory Capital Ratios and Reconciliations
Non-GAAP Measures, Regulatory Capital Ratios and Reconciliations 38
Slide 39: 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