10-QPeriod: Q1 FY2015

STATE STREET CORP Quarterly Report for Q1 Ended Mar 31, 2015

Filed May 8, 2015For Securities:STTSTT-PG

Summary

State Street Corporation's (STT) first quarter 2015 results demonstrate a 5% increase in total revenue, reaching $2.605 billion, primarily driven by a 7% rise in fee revenue, which benefited from stronger U.S. equity markets and net new business. However, net interest revenue saw a slight decline of 2%. The company also reported a significant charge of $150 million for a legal accrual related to indirect foreign exchange client activities, impacting total expenses, which grew by 3% to $2.097 billion. Despite this legal charge, net income increased by 13% to $409 million, and diluted earnings per share rose to $0.90. Financially, State Street maintained solid capital ratios, with Common Equity Tier 1 capital at 12.2% and Tier 1 capital at 14.2% under the Basel III Advanced Approaches. The company also completed a $1.7 billion common stock repurchase program and announced a new $1.8 billion program, along with a proposed increase in its quarterly dividend. The strong U.S. dollar had a notable impact, reducing reported revenue by approximately $97 million.

Financial Highlights

35 data points
Beta

Revenue

$2.60B

Net Income

$405.00M

15.6% Net Margin

EPS (Diluted)

$0.89

Total Assets

$279.48B

Free Cash Flow

$301.00M

Financial Statements
Beta
Revenue$2.60B
Interest Expense$96.00M
Net Income$405.00M
EPS (Basic)$0.90
EPS (Diluted)$0.89
Shares Outstanding (Basic)412.23M
Shares Outstanding (Diluted)418.75M

Key Highlights

  • 1Total revenue increased by 5% year-over-year to $2.605 billion, driven by a 7% increase in fee revenue.
  • 2A significant legal accrual of $150 million was recorded for indirect foreign exchange client activities, contributing to a 3% increase in total expenses.
  • 3Net income grew by 13% to $409 million, and diluted EPS increased to $0.90 from $0.81 in the prior year period.
  • 4The company completed a $1.7 billion common stock repurchase program and announced a new $1.8 billion program, indicating a commitment to returning capital to shareholders.
  • 5Asset servicing and asset management fees each increased by 3%, reflecting positive revenue from new business and stronger equity markets, partially offset by the strong U.S. dollar.
  • 6Net interest revenue decreased by 2% due to lower yields on interest-earning assets, influenced by global interest rates and the strong U.S. dollar.
  • 7State Street maintained robust regulatory capital ratios, with Common Equity Tier 1 capital at 12.2% and Tier 1 capital at 14.2% under Basel III Advanced Approaches.

Frequently Asked Questions

State Street's revenue growth in the first quarter of 2015 was primarily driven by a 7% increase in total fee revenue. This growth was attributed to strong U.S. equity markets and net new business in both asset servicing and asset management, although partially offset by the impact of the stronger U.S. dollar.

State Street recorded a $150 million charge in the first quarter of 2015 as a legal accrual related to indirect foreign exchange client activities. This accrual reflects ongoing negotiations to resolve claims asserted by governmental entities and civil litigants. This charge, along with other factors, contributed to a 3% increase in total expenses for the quarter.

The strong U.S. dollar had a negative impact on State Street's results. It reduced total revenue by approximately $97 million and also provided a benefit to total expenses by approximately $77 million when compared to the first quarter of 2014. The stronger dollar also offset some of the gains in fee revenue from new business and stronger equity markets.

State Street's capital management strategy includes returning capital to shareholders through share repurchases and dividends. The company completed a $1.7 billion common stock repurchase program and announced a new $1.8 billion program. It also proposed an increase in its quarterly common stock dividend. The company also maintained strong regulatory capital ratios, exceeding minimum requirements under Basel III.