10-QPeriod: Q1 FY2016

STATE STREET CORP Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 6, 2016For Securities:STTSTT-PG

Summary

State Street Corporation's (STT) first quarter 2016 results show a decline in revenue and net income compared to the prior year, primarily driven by lower fee and net interest revenues. Total revenue decreased by 4% to $2.48 billion, and net income fell 9% to $368 million. This was largely attributed to a stronger U.S. dollar and lower global equity markets impacting servicing and management fees, as well as management actions to optimize the balance sheet leading to reduced net interest revenue. Despite revenue pressures, State Street continued its capital return initiatives, declaring a common stock dividend of $0.34 per share and repurchasing approximately $325 million of its common stock in the quarter. The company also announced a significant acquisition of GE Asset Management, expected to close in the third quarter of 2016, which is anticipated to incur integration costs. Significant restructuring charges of $97 million were recorded for the 'State Street Beacon' transformation program. The company's regulatory capital ratios remain robust, exceeding minimum requirements, although specific disclosures highlight ongoing focus on complying with evolving regulatory frameworks.

Financial Highlights

37 data points
Beta

Revenue

$2.48B

Net Income

$368.00M

14.8% Net Margin

EPS (Diluted)

$0.79

Total Assets

$243.69B

Free Cash Flow

$2.68B

Financial Statements
Beta
Revenue$2.48B
Interest Expense$117.00M
Net Income$368.00M
EPS (Basic)$0.80
EPS (Diluted)$0.79
Shares Outstanding (Basic)399.42M
Shares Outstanding (Diluted)403.62M

Key Highlights

  • 1Total revenue declined 4% year-over-year to $2.48 billion, driven by lower fee revenue (-4%) and net interest revenue (-6%).
  • 2Net income decreased 9% to $368 million, resulting in diluted EPS of $0.79, down from $0.89 in the prior year.
  • 3Servicing fees were down 2% and management fees were down 10%, reflecting impacts from lower global equity markets and a stronger U.S. dollar.
  • 4The company incurred $97 million in restructuring charges related to the 'State Street Beacon' transformation program.
  • 5State Street repurchased approximately $325 million of its common stock during the quarter under its approved share repurchase program.
  • 6A significant acquisition of GE Asset Management was announced, valued at $435 million, expected to close in Q3 2016.
  • 7Return on average common equity decreased to 6.8% from 7.9% in the prior year's quarter.

Frequently Asked Questions

The primary drivers of the revenue decline were lower fee revenue, down 4% to $1.97 billion, and lower net interest revenue, down 6% to $512 million. These decreases were largely due to the impact of a stronger U.S. dollar on foreign exchange trading and servicing fees, lower global equity markets affecting management and servicing fees, and management actions to optimize the balance sheet which reduced net interest revenue.

State Street is undertaking a multi-year transformation program called 'State Street Beacon.' This program aims to create cost efficiencies and fully digitize the business to develop new solutions and capabilities for clients. In Q1 2016, the company recorded $97 million in restructuring charges related to this program.

State Street continued to return capital to shareholders by declaring a common stock dividend of $0.34 per share, totaling $135 million in the quarter. Additionally, the company repurchased approximately $325 million of its common stock under its share repurchase program. State Street's regulatory capital ratios remain strong and above minimum requirements.

State Street announced its agreement to acquire GE Asset Management for $435 million. The transaction is expected to close in the third quarter of 2016, subject to regulatory approvals. The company anticipates incurring approximately $70 million to $80 million in merger and integration costs through 2018.