10-QPeriod: Q1 FY2018

STATE STREET CORP Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 3, 2018For Securities:STTSTT-PG

Summary

State Street Corporation (STT) reported a strong first quarter of 2018, demonstrating significant growth across key financial metrics compared to the prior year's first quarter. Total revenue surged by 13% to $3,019 million, driven by a robust 29% increase in Net Interest Income (NII) to $658 million, largely attributed to higher U.S. interest rates and disciplined liability pricing. Fee revenue also saw a healthy 8% increase to $2,363 million, propelled by strong performance in servicing and management fees, benefiting from higher global equity markets and new business wins. Diluted Earnings Per Share (EPS) grew an impressive 41% to $1.62, and Return on Average Common Equity (ROE) improved to 12.8% from 9.9%. Despite an 8% increase in total expenses, primarily due to investments in new business and compensation costs, the company maintained positive operating leverage. State Street also actively managed its capital, returning value to shareholders through an 11% increase in common stock dividends and substantial share repurchases.

Financial Statements
Beta
Revenue$3.06B
Interest Expense$214.00M
Net Income$659.00M
EPS (Basic)$1.64
EPS (Diluted)$1.62
Shares Outstanding (Basic)367.44M
Shares Outstanding (Diluted)372.62M

Key Highlights

  • 1Total revenue increased 13% year-over-year to $3.019 billion.
  • 2Net Interest Income (NII) grew 29% year-over-year to $658 million, driven by higher U.S. interest rates.
  • 3Diluted Earnings Per Share (EPS) increased 41% year-over-year to $1.62.
  • 4Return on Average Common Equity (ROE) improved to 12.8% from 9.9% in the prior year.
  • 5Total expenses increased 8% year-over-year, primarily due to investments in new business and compensation.
  • 6Servicing fees increased 10% and Management fees increased 24%, reflecting strong market conditions and new business.
  • 7State Street returned $154 million in common stock dividends and repurchased $350 million in common stock during the quarter.

Frequently Asked Questions

State Street's revenue growth was primarily driven by a 29% increase in Net Interest Income, fueled by higher U.S. interest rates and effective liability pricing, and an 8% increase in fee revenue, boosted by higher servicing and management fees due to favorable market conditions and new business.

State Street showed significant improvements in profitability. Diluted Earnings Per Share (EPS) grew 41% to $1.62, and Return on Average Common Equity (ROE) improved from 9.9% to 12.8%.

Total expenses rose by 8%, mainly due to increased investments to support new business, higher compensation and employee benefit costs, and the impact of adopting new revenue recognition accounting standards.

State Street returned capital to shareholders by increasing common stock dividends by 11% to $0.42 per share and repurchasing $350 million of its common stock during the quarter under its approved share repurchase program.