10-QPeriod: Q3 FY2023

STATE STREET CORP Quarterly Report for Q3 Ended Sep 30, 2023

Filed October 27, 2023For Securities:STTSTT-PG

Summary

State Street Corporation's (STT) Q3 2023 filing reveals a mixed financial performance, impacted by a significant one-time event. Total revenue decreased by 9% year-over-year to $2.7 billion, primarily due to a $294 million pre-tax loss on the sale of investment securities as part of a portfolio repositioning. This repositioning, while impacting short-term results, is expected to benefit Net Interest Income (NII) in future periods. Diluted Earnings Per Share (EPS) fell 31% to $1.25. Despite the revenue decline, total fee revenue saw a modest 3% increase to $2.36 billion, driven by higher servicing, management, and software/processing fees, although offset by lower securities finance and FX trading revenue. Expenses increased by 3% to $2.18 billion, largely due to higher compensation and ongoing business investments. The company continued to return capital to shareholders, declaring $0.69 per share in common stock dividends and repurchasing approximately $1.0 billion in common stock during the quarter.

Financial Highlights

38 data points
Beta

Revenue

$2.69B

Net Income

$422.00M

15.7% Net Margin

EPS (Diluted)

$1.25

Total Assets

$284.42B

Cash & Equivalents

$4.01B

Free Cash Flow

$87.00M

Financial Statements
Beta
Revenue$2.69B
Interest Expense$1.70B
Net Income$422.00M
EPS (Basic)$1.27
EPS (Diluted)$1.25
Shares Outstanding (Basic)313.15M
Shares Outstanding (Diluted)317.33M

Key Highlights

  • 1Q3 2023 diluted EPS of $1.25, down 31% year-over-year, impacted by a $294 million loss on investment securities sale.
  • 2Total revenue decreased 9% to $2.7 billion, primarily due to the investment securities sale and lower Net Interest Income (NII).
  • 3Total fee revenue increased 3% to $2.36 billion, driven by higher servicing, management, and software/processing fees.
  • 4Total expenses rose 3% to $2.18 billion, reflecting higher compensation and business investments.
  • 5Assets Under Custody/Administration (AUC/A) grew 12% to $40.02 trillion, and Assets Under Management (AUM) increased 12.9% to $3.7 trillion.
  • 6State Street returned $1.2 billion to shareholders via dividends and share repurchases in Q3 2023.
  • 7The company's CET1 capital ratio stood at 11.0% as of September 30, 2023.

Frequently Asked Questions

The significant drop in net income and EPS was primarily due to a $294 million pre-tax loss on the sale of investment securities as part of a portfolio repositioning. This one-time event reduced EPS by approximately $0.68.

NII decreased by 5% to $624 million in Q3 2023 compared to Q3 2022. This decline was mainly due to lower average deposit balances and a shift in deposit mix towards interest-bearing deposits, partially offset by higher interest rates.

State Street expects its CET1 capital ratio to remain within its target range of 10-11% and its Tier 1 leverage ratio to move into its target range of 5.25-5.75% in the fourth quarter of 2023. The CET1 ratio decreased to 11.0% as of September 30, 2023, from 13.6% at the end of 2022, primarily due to share repurchases and higher risk-weighted assets.

Total expenses increased by 3% in Q3 2023, driven by higher compensation and employee benefits ($1.08 billion, up 4%) and information systems and communications ($411 million, up 3%). These increases were partially offset by productivity savings and the absence of acquisition and restructuring costs from the prior year.