STATE STREET CORP Quarterly Report for Q3 Ended Sep 30, 2019

Summary

State Street Corporation's (STT) Q3 2019 performance showed a decrease in total revenue and net income compared to the prior year, impacted by lower fee revenue and net interest income. Fee revenue was down 3% driven by declines in servicing, management, foreign exchange trading, and securities finance revenues. Net interest income also decreased by 4%, primarily due to lower long-end rates and a shift away from non-interest-bearing deposits. Despite these headwinds, the company continued to execute its expense savings program, achieving $100 million in gross savings in Q3 2019, contributing to the year-to-date savings of $275 million. State Street also demonstrated a commitment to returning capital to shareholders, repurchasing $500 million of common stock and increasing its quarterly dividend by 11% year-over-year. The acquisition of Charles River Development (CRD) contributed positively to revenue, particularly in processing fees and other revenue, but also increased expenses, including amortization of intangible assets. The company's Assets Under Custody/Administration (AUC/A) saw a slight decrease, while Assets Under Management (AUM) increased, driven by market appreciation and net inflows. Regulatory capital ratios remained strong, with CET1 at 11.3% and a Tier 1 leverage ratio of 7.4%. The company's forward-looking statements highlight ongoing efforts to manage expenses, digitize operations, and navigate market volatility and evolving regulatory landscapes.

Key Highlights

• 1Total revenue decreased by 3% to $2.90 billion, and net income available to common shareholders decreased by 25% to $528 million for Q3 2019 compared to Q3 2018.
• 2Fee revenue declined 3% to $2.26 billion, primarily due to lower servicing fees (-5%), management fees (-6%), and securities finance revenues (-9%).
• 3Net interest income decreased by 4% to $644 million, influenced by lower interest rates and changes in deposit mix.
• 4Total expenses increased by 4% to $2.18 billion, largely driven by the CRD acquisition and acquisition-related costs, partially offset by expense savings initiatives.
• 5The company repurchased $500 million of common stock in Q3 2019 and increased its common stock dividend by 11% to $0.52 per share.
• 6Assets Under Custody/Administration (AUC/A) decreased by 3% to $32.90 trillion, while Assets Under Management (AUM) increased by 5% to $2.95 trillion.
• 7State Street's Common Equity Tier 1 (CET1) capital ratio was 11.3%, and its Tier 1 leverage ratio was 7.4% as of September 30, 2019.

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