10-QPeriod: Q1 FY2024

STATE STREET CORP Quarterly Report for Q1 Ended Mar 31, 2024

Filed May 2, 2024For Securities:STTSTT-PG

Summary

State Street Corporation reported mixed financial results for the first quarter of 2024. Total revenue saw a slight increase of 1% year-over-year, driven by a 4% rise in fee revenue, which was partially offset by a 7% decline in net interest income. The decrease in net interest income was primarily attributed to a shift in deposit mix towards interest-bearing deposits and lower average non-interest-bearing deposit balances, despite higher average interest rates. Total expenses increased by 6%, significantly impacted by a $130 million increase in the FDIC special assessment, which alone contributed approximately 5 percentage points to the expense growth. Excluding this assessment, expense growth was more moderate, driven by business investments largely offset by productivity savings. Diluted earnings per share decreased by 10% to $1.37, primarily due to the FDIC assessment's impact. The company continued its capital return program, increasing dividends per share by 10% and repurchasing $100 million in common stock.

Financial Highlights

38 data points
Beta

Revenue

$3.14B

Net Income

$463.00M

14.8% Net Margin

EPS (Diluted)

$1.37

Total Assets

$338.00B

Cash & Equivalents

$3.41B

Free Cash Flow

-$1.07B

Financial Statements
Beta
Revenue$3.14B
Interest Expense$2.17B
Net Income$463.00M
EPS (Basic)$1.38
EPS (Diluted)$1.37
Shares Outstanding (Basic)301.99M
Shares Outstanding (Diluted)305.94M

Key Highlights

  • 1Total revenue increased 1% to $3.14 billion, primarily driven by a 4% increase in fee revenue, while net interest income decreased 7%.
  • 2Fee revenue growth was led by a 12% increase in management fees and a 25% increase in software and processing fees, while servicing fees increased 1% and FX trading services revenue decreased 3%.
  • 3Total expenses rose 6% to $2.51 billion, largely due to a $130 million FDIC special assessment which impacted EPS by $0.32.
  • 4Diluted EPS decreased 10% to $1.37, reflecting the impact of the FDIC special assessment and higher expenses.
  • 5Assets Under Custody/Administration (AUC/A) increased 17% to $43.91 trillion, and Assets Under Management (AUM) increased 20% to $4.34 trillion, reflecting higher market levels and net new business.
  • 6State Street returned $308 million to shareholders through dividends ($208 million) and share repurchases ($100 million).
  • 7The Common Equity Tier 1 (CET1) capital ratio was 11.1%, and the Tier 1 leverage ratio was 5.4%, both within or above the company's target ranges.

Frequently Asked Questions

State Street's total revenue increased slightly by 1% year-over-year. This was primarily driven by a 4% increase in fee revenue, boosted by strong growth in management fees (up 12%) and software and processing fees (up 25%). However, this growth was partially offset by a 7% decrease in net interest income, which was mainly due to a shift in customer deposit mix towards interest-bearing accounts and a decrease in non-interest-bearing deposits, despite higher overall interest rates.

State Street recognized a $130 million increase to the FDIC special assessment in the first quarter of 2024. This assessment significantly impacted the company's profitability, contributing approximately 5 percentage points to the overall 6% increase in total expenses and reducing diluted earnings per share by $0.32.

State Street maintained strong capital ratios, with its CET1 capital ratio at 11.1% and Tier 1 leverage ratio at 5.4%, both within or above its target ranges. The company returned $308 million to shareholders in the first quarter of 2024 through a combination of common stock dividends ($208 million, an increase of 10% per share) and common share repurchases ($100 million).

State Street experienced significant growth in both AUC/A and AUM. AUC/A increased by 17% year-over-year to $43.91 trillion, driven by higher market levels and net new business. AUM also rose by 20% to $4.34 trillion, reflecting similar factors. The company noted that approximately $2.58 trillion of AUC/A is remaining to be installed in future periods, expected over the next 24 months, which should contribute to future fee revenue.