10-QPeriod: Q1 FY2013

STATE STREET CORP Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 3, 2013For Securities:STTSTT-PG

Summary

State Street Corporation (STT) reported a modest 1% increase in total revenue to $2.44 billion for the first quarter of 2013, driven by a 4% rise in total fee revenue, primarily from servicing and management fees. This growth was partially offset by an 8% decline in net interest revenue. Net income saw a healthy 9% increase to $464 million, resulting in diluted earnings per share of $0.98, up from $0.85 in the prior year's first quarter. The company's balance sheet experienced growth, with total assets increasing, reflecting stronger market valuations and net new business installations. Capital ratios remained strong, with Tier 1 capital significantly exceeding regulatory requirements. The company announced its Board of Directors approved a new common stock purchase program of up to $2.10 billion, following the full execution of a previous $1.80 billion program. Despite a challenging net interest revenue environment due to lower global market rates, State Street's core fee-based businesses demonstrated resilience. The Business Operations and Information Technology Transformation program is progressing, with ongoing expense savings contributing to operational efficiency.

Financial Highlights

34 data points
Beta

Revenue

$2.44B

Net Income

$464.00M

19.1% Net Margin

EPS (Diluted)

$0.98

Total Assets

$218.19B

Free Cash Flow

$263.00M

Financial Statements
Beta
Revenue$2.44B
Interest Expense$111.00M
Net Income$464.00M
EPS (Basic)$1.00
EPS (Diluted)$0.98
Shares Outstanding (Basic)454.31M
Shares Outstanding (Diluted)462.75M

Key Highlights

  • 1Total revenue increased 1% year-over-year to $2.44 billion.
  • 2Total fee revenue grew 4% to $1.86 billion, driven by servicing and management fees.
  • 3Net interest revenue declined 8% to $576 million due to lower global market rates.
  • 4Net income increased 9% to $464 million, with diluted EPS rising to $0.98.
  • 5The company's Board approved a new $2.10 billion common stock repurchase program.
  • 6Capital ratios remained robust, exceeding regulatory minimums.
  • 7The Business Operations and Information Technology Transformation program continues to yield expense savings.

Frequently Asked Questions

The primary driver of State Street's revenue growth was the increase in total fee revenue, which rose 4% to $1.86 billion. This was largely due to a 9% increase in servicing fees and an 11% increase in management fees, benefiting from stronger global equity markets and net new business installations.

Net interest revenue decreased by 8% to $576 million. This decline was primarily attributed to lower global market rates, which reduced yields on earning assets, and the repricing of floating-rate investment securities. This was partially offset by lower funding costs and higher levels of client deposits invested with central banks.

State Street maintained strong capital levels, with its Tier 1 capital significantly exceeding regulatory requirements. The company also announced a new common stock purchase program of up to $2.10 billion, indicating confidence in its financial strength and commitment to returning capital to shareholders.

The Business Operations and Information Technology Transformation program is ongoing, with State Street achieving cumulative pre-tax expense savings and expecting further savings in 2013. The program involves standardizing business processes, migrating to a new technology platform, and expanding the use of service providers, which has led to increased information systems expenses but is expected to drive long-term efficiency.