10-QPeriod: Q1 FY2019

STATE STREET CORP Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 1, 2019For Securities:STTSTT-PG

Summary

State Street Corporation's (STT) first quarter 2019 results showed a decline in net income and earnings per share compared to the prior year, primarily due to challenging industry conditions and lower average equity market levels impacting fee revenues. Total revenue decreased by 4% to $2.93 billion, with fee revenue down 6% driven by lower servicing and management fees. Net interest income saw a 5% increase to $673 million, benefiting from higher U.S. interest rates. Expenses increased by 1% to $2.29 billion, partly due to acquisition and restructuring costs related to the CRD acquisition and increased technology spending, though offset by expense savings initiatives. Despite revenue headwinds, State Street continued to return capital to shareholders, declaring a 12% increase in its common stock dividend to $0.47 per share and repurchasing $300 million of its common stock. The company's liquidity and capital positions remained strong, with a Common Equity Tier 1 (CET1) capital ratio of 11.5% and a Tier 1 leverage ratio of 7.4% as of March 31, 2019. Management remains focused on executing expense savings programs to navigate market challenges.

Financial Highlights

38 data points
Beta

Revenue

$2.93B

Net Income

$508.00M

17.3% Net Margin

EPS (Diluted)

$1.18

Total Assets

$228.33B

Cash & Equivalents

$4.00B

Free Cash Flow

-$750.00M

Financial Statements
Beta
Revenue$2.93B
Interest Expense$354.00M
Net Income$508.00M
EPS (Basic)$1.20
EPS (Diluted)$1.18
Shares Outstanding (Basic)377.92M
Shares Outstanding (Diluted)381.70M

Key Highlights

  • 1Net income decreased by 23% to $508 million, and diluted EPS fell 27% to $1.18 compared to Q1 2018.
  • 2Total revenue declined 4% year-over-year to $2.93 billion, impacted by challenging industry conditions and lower equity markets.
  • 3Fee revenue decreased by 6% to $2.26 billion, with servicing fees down 12% and management fees down 11%.
  • 4Net interest income increased by 5% to $673 million, driven by higher U.S. interest rates.
  • 5Total expenses rose 1% to $2.29 billion, influenced by acquisition costs for CRD and technology investments, partially offset by expense savings.
  • 6State Street returned $480 million to shareholders through dividends ($177 million) and share repurchases ($300 million).
  • 7CET1 capital ratio stood at 11.5%, and Tier 1 leverage ratio at 7.4% as of March 31, 2019.

Frequently Asked Questions

The decline in revenue was primarily driven by challenging industry conditions, lower average equity market levels, fee concessions, lower client activity and flows, and a client transition. Specifically, servicing fees decreased by 12% and management fees decreased by 11%.

The CRD acquisition contributed approximately $99 million in total revenue, primarily from processing fees and other revenue ($95 million), and approximately $41 million in total expenses in the first quarter of 2019. CRD-related expenses also included $15 million in amortization of other intangible assets.

State Street demonstrated a commitment to returning capital, increasing its common stock dividend by 12% to $0.47 per share and repurchasing $300 million of its common stock in the first quarter of 2019 under its authorized share repurchase program.

State Street maintained strong capital levels. The standardized CET1 capital ratio decreased slightly to 11.5% as of March 31, 2019, compared to 11.7% at the end of 2018. The Tier 1 leverage ratio improved to 7.4% from 7.2% in the same period.