10-QPeriod: Q3 FY2017

STATE STREET CORP Quarterly Report for Q3 Ended Sep 30, 2017

Filed November 1, 2017For Securities:STTSTT-PG

Summary

State Street Corporation (STT) reported solid financial results for the third quarter and the first nine months of 2017. Total revenue saw a notable increase of 9% year-over-year for the quarter, driven by growth in fee revenue (8%) and net interest income (12%). This performance was primarily attributed to higher global equity markets, new asset servicing business, and the favorable impact of a weaker U.S. dollar, which boosted fee revenues. Net interest income benefited from higher U.S. market interest rates and loan portfolio growth. Earnings per diluted share grew by an impressive 29% to $1.66 for the quarter, and Return on Average Common Equity (ROE) improved to 13.0% from 10.6% in the prior year's quarter. The company also demonstrated a commitment to returning capital to shareholders by increasing its common stock dividend by 11% year-over-year and repurchasing approximately $350 million of its common stock. Despite a 2% increase in total expenses, largely due to investments in new business and compensation, State Street maintained a strong pre-tax margin of 28.9%, up from 24.3% in the prior year's quarter, indicating effective cost management alongside growth initiatives.

Financial Highlights

36 data points
Beta

Revenue

$2.85B

Net Income

$685.00M

24.1% Net Margin

EPS (Diluted)

$1.66

Total Assets

$235.99B

Free Cash Flow

-$2.30B

Financial Statements
Beta
Revenue$2.85B
Interest Expense$158.00M
Net Income$685.00M
EPS (Basic)$1.69
EPS (Diluted)$1.66
Shares Outstanding (Basic)372.76M
Shares Outstanding (Diluted)378.52M

Key Highlights

  • 1Total revenue increased by 9% to $2.85 billion in Q3 2017 compared to Q3 2016.
  • 2Diluted earnings per common share increased by 29% to $1.66 in Q3 2017 compared to Q3 2016.
  • 3Return on average common equity improved to 13.0% in Q3 2017 from 10.6% in Q3 2016.
  • 4Fee revenue increased by 8% to $2.24 billion in Q3 2017, driven by higher global equity markets and new asset servicing business.
  • 5Net interest income grew by 12% to $603 million in Q3 2017, benefiting from higher interest rates and loan portfolio growth.
  • 6Total expenses increased by 2% to $2.02 billion in Q3 2017, reflecting investments in new business and compensation, partially offset by cost savings initiatives.
  • 7State Street declared a quarterly common stock dividend of $0.42 per share, an 11% increase year-over-year, and repurchased approximately $350 million of common stock.

Frequently Asked Questions

State Street's revenue growth was primarily driven by higher global equity markets, new asset servicing business, and the positive impact of a weaker U.S. dollar. Net interest income also contributed positively due to higher U.S. market interest rates and growth in the loan portfolio.

Total expenses increased by 2% in Q3 2017. This increase was mainly due to investments in new business, annual merit and performance-related incentive compensation, and the impact of the weaker U.S. dollar. However, the company also benefited from approximately $35 million in savings from its 'Beacon' transformation program.

State Street demonstrated its commitment to returning capital to shareholders by increasing its quarterly common stock dividend by 11% to $0.42 per share. Additionally, the company repurchased approximately $350 million of its common stock during the third quarter under its approved stock purchase program.

The 'Beacon' program is a multi-year transformation initiative aimed at creating cost efficiencies through operational process changes and digitization. It is expected to deliver significant value and innovation for clients while lowering expenses across the organization. The company is already realizing savings from this program and expects further benefits.