01—Abstract
Summary
Summary of the 10-K filed February 21, 2019. Cited figures are marked; the original filing is the authoritative source.
State Street Corporation (STT) reported its 2018 financial results in this 10-K filing, highlighting its core businesses of Investment Servicing and Investment Management.
The company processed $31.62 trilliona in Assets Under Custody/Administration (AUC/A) and managed $2.51 trillion in Assets Under Management (AUM) as of December 31, 2018. A significant event during the year was the acquisition of Charles River Development for approximately $2.6 billion, which is expected to enhance its front-to-back office platform capabilities. The company navigated a complex regulatory environment, including evolving capital and liquidity standards under Basel III and the Dodd-Frank Act, and maintained strong capital ratios throughout the year.
Despite market headwinds and fee compression impacting revenues, State Street's earnings per share (EPS) increased by 22% year-over-year to $6.40b, driven by repositioning charges and other factors. The company also emphasized its commitment to operational efficiency and risk management, with ongoing initiatives to optimize processes and technology.
02—Key points
Key Highlights
- State Street Corporation reported Assets Under Custody/Administration (AUC/A) of $31.62 trillion and Assets Under Management (AUM) of $2.51 trillion as of December 31, 2018.
- The company completed the acquisition of Charles River Development for approximately $2.6 billion in October 2018, aiming to strengthen its front-to-back office platform.
- State Street's Diluted Earnings Per Share (EPS) increased by 22% to $6.40 in 2018 compared to $5.24 in 2017, despite facing market headwinds and fee compression.
- Total revenue increased by 7% year-over-year to $11.98 billion in 2018, driven by growth in fee revenue and net interest income.
- Total expenses increased by 9% to $8.97 billion in 2018, largely due to repositioning charges, adoption of new revenue recognition standards, and higher technology costs.
- The company's regulatory capital ratios remained strong, with a Common Equity Tier 1 (CET1) ratio of 12.1% (advanced approaches) and a Tier 1 Leverage Ratio of 7.2% as of December 31, 2018.
- State Street continued its share repurchase program and declared common stock dividends totaling $665 million in 2018, reflecting a commitment to returning capital to shareholders.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 21, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $12.13B$11.27B | +7.7% |
| Interest Expense | $991.00M$604.00M | +64.1% |
| Net Income | $2.59B$2.16B | +20.3% |
| EPS (Basic) | $6.46$5.26 | +22.8% |
| EPS (Diluted) | $6.39$5.19 | +23.1% |
| Shares Outstanding (Basic) | 371.98M374.79M | −0.7% |
| Shares Outstanding (Diluted) | 376.48M380.21M | −1.0% |
05—Questions
Frequently Asked Questions
What were State Street's main lines of business as of December 31, 2018?
State Street operates through two primary lines of business: Investment Servicing, which provides custody, accounting, and related services to institutional investors, and Investment Management, through State Street Global Advisors, which offers a range of investment strategies and products.
How did the acquisition of Charles River Development impact State Street's financial results in 2018?
State Street completed the acquisition of Charles River Development for $2.6 billion in October 2018. Charles River Development contributed approximately $121 million in total revenue and $57 million in total expenses in the fourth quarter of 2018. The acquisition is expected to enhance State Street's front-to-back office platform capabilities.
What is State Street's regulatory capital position?
As of December 31, 2018, State Street maintained strong regulatory capital ratios. The Common Equity Tier 1 (CET1) capital ratio was 12.1% under the advanced approaches, and the Tier 1 Leverage Ratio was 7.2%. The company exceeded all applicable regulatory capital adequacy requirements and maintained a 'well capitalized' status.
How did market conditions affect State Street's revenue in 2018?
State Street's revenues were impacted by unfavorable market conditions and fee compression, particularly affecting servicing fee revenue. However, management fees increased by 15% due to higher average global equity markets, and net interest income rose by 16% due to higher U.S. interest rates. Overall, total revenue increased by 7%.
06—Continue