Summary
State Street Corporation (STT) reported a mixed financial performance for the third quarter of 2011 compared to the prior year. Total revenue saw a modest 5% increase, driven by a significant 18% rise in fee revenue, which offset a 20% decline in net interest revenue. This shift in revenue composition indicates a growing reliance on fee-based services, such as servicing and management fees, which benefited from higher market valuations and net new business installations. Trading services also experienced a strong surge, particularly foreign exchange trading, due to increased volatility and client volumes. However, the company's expenses also rose by 18%, largely due to higher salaries, benefits, and costs associated with its ongoing business operations and IT transformation program. This increase in expenses, coupled with a significant decrease in income tax expense (primarily due to a discrete tax benefit), resulted in a slight increase in net income available to common shareholders. Investors should note the company's aggressive share repurchase program and the recommencement of common stock dividend increases, signaling a commitment to shareholder returns, albeit alongside ongoing restructuring efforts.
Financial Highlights
36 data points| Revenue | $2.43B |
| Interest Expense | $150.00M |
| Net Income | $555.00M |
| EPS (Basic) | $1.11 |
| EPS (Diluted) | $1.10 |
| Shares Outstanding (Basic) | 490.84M |
| Shares Outstanding (Diluted) | 494.78M |
Key Highlights
- 1Total revenue increased by 5% to $2.43 billion, driven by an 18% increase in total fee revenue to $1.84 billion.
- 2Net interest revenue declined by 20% to $578 million, primarily due to lower discount accretion from former conduit securities.
- 3Servicing fees grew 10% and management fees increased 17%, reflecting positive market valuations and new business.
- 4Trading services revenue saw a substantial 46% increase, with foreign exchange trading up 91% due to higher volatility and volumes.
- 5Total expenses increased by 18% to $1.80 billion, driven by higher salaries, employee benefits, and restructuring costs.
- 6Net income available to common shareholders slightly increased to $543 million, with diluted earnings per share at $1.10.
- 7State Street repurchased approximately $450 million of its common stock in the third quarter and increased its quarterly dividend to $0.18 per share.