STATE STREET CORP Quarterly Report for Q2 Ended Jun 30, 2016

Summary

State Street Corporation (STT) reported its Q2 2016 results, showing a slight decrease in total revenue year-over-year, primarily driven by lower servicing and management fees. However, the company saw a significant increase in net income, up 48% to $619 million, or $1.47 per diluted share, driven by a substantial decrease in total expenses, largely due to a significant reduction in legal accruals compared to the prior year's quarter. Operationally, State Street secured substantial new asset servicing mandates, totaling $750 billion, indicating strong client acquisition. The company also continued its capital return program, declaring dividends and executing share repurchases. Despite a challenging market environment with lower global equity markets and a stronger U.S. dollar impacting fee revenues, State Street's profitability improved due to effective cost management. Investors should monitor the company's progress on its 'State Street Beacon' transformation program and integration of the recently acquired GE Asset Management, as these initiatives are expected to shape future cost efficiencies and revenue growth.

Key Highlights

• 1Net income increased by 48% to $619 million compared to Q2 2015, driven by lower expenses.
• 2Total revenue decreased by 1% to $2,573 million compared to Q2 2015, impacted by lower fee revenues.
• 3Total expenses decreased by 13% to $1,860 million in Q2 2016, primarily due to lower legal accruals.
• 4Secured new asset servicing mandates of $750 billion in Q2 2016, including significant wins from two European asset managers.
• 5Declared common stock dividends of $0.34 per share, totaling approximately $268 million in Q2 2016.
• 6Completed the acquisition of GE Asset Management for $435 million, which is expected to be reflected in Q3 2016 results.
• 7Recorded a $58 million pre-tax charge in Q2 2016 related to an increase in reserves for invoiced client expenses.

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