01—Abstract
Summary
Summary of the 8-K filed April 12, 2024. Cited figures are marked; the original filing is the authoritative source.
State Street (STT) reported first-quarter 2024 GAAP diluted EPS of $1.37a, down 10% year over year, or $1.69 excluding notable items, up 11%.
The GAAP decline was driven by a $130 millionb pre-tax FDIC special assessment, which cost $0.32 per share. Total fee revenue rose 4% to $2.42 billion, led by management fees (up 12%) and front office software and data revenue (up 32%). Net interest income fell 7% year over year to $716 million on deposit mix shift and lower non-interest-bearing balances, though it rose 6% sequentially.
Total revenue grew 1% to $3.14 billionc. Total expenses were up 6% GAAP but only 1% excluding notable items, producing positive fee operating leverage of 3 points excluding notable items (negative 2 points on a GAAP basis). Business momentum was solid.
Record AUC/A reached $43.9 trilliond and record AUM reached $4.3 trillion, both up roughly 17-20% year over year, largely on higher market levels. New servicing AUC/A wins were $474 billion and new servicing fee revenue wins were $67 million. Front office software and data ARR rose 19% to $326 million, and the company completed the CF Global Trading acquisition.
Trading-related revenues were pressured by muted volatility, with FX trading down 3% and securities finance down 12%. Capital and liquidity remained adequate but softer. The standardized CET1 ratio was 11.1%, down 1 point year over year, largely reflecting share repurchases and other capital distributions.
The company returned $308 million to common shareholders, comprising $100 million of buybacks and $208 million of dividends ($0.69 per share). The filing is an earnings release furnished under Items 2.02 and 7.01; it contains no new material agreements or guidance changes.
02—Key points
Key Highlights
- GAAP diluted EPS of $1.37 (down 10% YoY) included a $130M FDIC special assessment ($0.32 per share); excluding notable items EPS was $1.69, up 11% YoY
- Total fee revenue rose 4% YoY to $2.42B, led by Management fees (+12%) and Front office software and data (+32%)
- Net interest income fell 7% YoY to $716M due to deposit mix shift, though it rose 6% sequentially; NIM was 1.13%
- Excluding notable items, expenses rose only 1% YoY and fee operating leverage was positive at +3 points (GAAP: -2 points)
- Record AUC/A of $43.9T and record AUM of $4.3T; new servicing AUC/A wins of $474B
- Standardized CET1 ratio of 11.1%, down 1 point YoY; $308M returned to common shareholders in the quarter
- Trading-linked revenues were weak: FX trading down 3% and securities finance down 12% on muted volatility and lower specials activity
03—Questions
Frequently Asked Questions
Why did State Street's reported EPS decline despite fee revenue growth?
Reported EPS of $1.37 was down 10% YoY, primarily because of a $130 million pre-tax FDIC special assessment that reduced EPS by $0.32. Excluding this notable item, EPS was $1.69, up 11% YoY, reflecting fee revenue growth and disciplined expense management.
What drove the growth in fee revenue this quarter?
Fee revenue rose 4% YoY to $2.42 billion. Management fees increased 12% on higher average market levels and prior-period net inflows, and Front office software and data revenue increased 32% from continued SaaS implementations and conversions. Servicing fees rose 1%, partly offset by lower FX trading and securities finance revenue.
Is net interest income a concern for investors?
NII fell 7% YoY to $716 million because of deposit mix shift and lower average non-interest-bearing deposits, partly offset by higher interest rates and loan growth. It rose 6% sequentially on higher securities yields and loan growth, so the trend has improved from the prior quarter, although the year-over-year comparison remains weak.
How strong is State State's capital position after this quarter?
The standardized CET1 ratio was 11.1% at quarter-end, down 1 point YoY and 0.5 points sequentially, mainly due to share repurchases, other capital distributions, and the normalization of risk-weighted assets. The Tier 1 leverage ratio was 5.4%, and the liquidity coverage ratio for State Street Corporation was approximately 107%.
What do the new business wins signal for future growth?
New servicing AUC/A wins were $474 billion, mostly from Asset Managers in North America and Europe, and new servicing fee revenue wins were $67 million. Management noted that AUC/A wins and backlog do not translate directly into future revenue, because fee realization depends on the timing of installation, pricing, and client activity. Servicing fee revenue still to be installed stood at $291 million.
04—Continue